The current view is that we will slow and grow by 6.5 per cent, as chairman of L&T said the other day. IMF says India should grow by 7 per cent, against earlier estimate of 7.2 per cent. Many of the credit rating agencies and private consultancies, not to say global banks, are also doing their growth projections.

On the basis of these figures the common minimum point we could agree upon is that until now India has been growing, and by some of the numbers growing decently.

Why this is important? Because only a couple of months back, no else than the former chief economic adviser, Arvind Subramaniam, had made observations that India’s growth figures were hopelessly inflated. Subramaniam is one of the mast favoured economists in the US circuits, and earlier he had written a book predicting that the Chinese was just about to replace the US dollars as globally most acceptable currency and that country will emerge as the by far biggest player. None of that has yet happened. It should happen, maybe, sometime in the future.

But coming back to India’s current growth performance, there is widespread concern we are screeching to a lower orbit. The dogged pessimists feel it might be worse.

The figures speak about a slowdown in at least two areas: automobile and real estate. Some larger data, like cargo movement and consumer non-durables sales have also grown slower than previously.

Nonetheless, the pointers are more towards a cyclical drop than a secular slow down. Only one sector, automobiles is as a matter of fact shrinking, that is, sales have dropped. In most others the growth rate has moderated.

There should not have been too much of surprise in this. A sector which has been growing at almost break neck speed for close to a decade- and- a-half, should slow down some time or other. In course of its fast clip, the structure of the automobile industry and its sales patterns have drastically altered as well. While previously automobile sales were primarily institutional, now it is driven mainly by individual purchases, at least in the personal vehicles segment.

For the individual, this is a capital outlay and such investments do not keep happening all the while. We have not yet reached a stage where an individual changes his car every alternate year and scraps the older one. On the contrary, the use life-span is very long and in several spirals. So after having grown so fast for such a long time, the industry will now reasonably be expected to push forward only haltingly, unless the makers made their cars very fragile.

Secondly, the automobile boom has been oiled by the non-banking finance companies, which have lent open-fistedly funding car purchases by individuals. On the ground, it is the car dealers tying up with the NBFCs which financed cars with the buyer just signing on the dotted lines. That process has stopped and dealers are also demanding upfront money in those cases where there are willing buyers. The onus is on the buyers to organise funds, instead of previously the dealers organising funds for the buyers.

Thirdly, in case of commercial vehicles, some changes in the axle weight regulations and scrappage policies can really push vehicles sales. But admittedly, the commercial vehicle sales should be closely linked with growth of cargo movement. Even with a marginal come down in growth rate, if cargo movements show some slack, decision on vehicle purchases will be deferred.

But any slow-down in the auto sector has some broader implication. Automobile industry is a major generator of down-stream employment. It is not just the people engaged in car factories or at the dealerships, the industry creates employment as it goes in the form of accessories, servicing, and various other jobs.

As for the realty sector, the same is the story. Housing finance companies and NBFCs were a major source of finance both for the real estate companies as well as for buyers. The large scale defaults and virtual wiping out of some of the largest players have created a vacuum. There are reports of housing projects in the last stages of completion which could yet not be finished and handed over to the buyers. Had these been finished and handed over, it would have automatically re-floated the building companies and they could have taken up new projects.

From the point of view of the home buyers, getting a finished home means outlays for furnishing to purchase of electrical items, consumer durables and much else. These small little steps add to the overall demand in the economy. Housing is one of those industries which have the largest multiplier imprint. Beginning of the construction of the house to its fitting-out, this activity alone can generate demand for steel, cement, construction labour, electrical goods, furniture and fixtures and of other things required in home.

Two major sector having been hobbled recently, these should reasonably have some sobering influence on growth mania. The solution lies in taking some corrective steps, at least for housing, for kick-starting the economy. Instead, we read reports about detection of some irregularities in a major housing companies and foreclosure of all its activities in Bombay.

These apart, there are wider macro-economic factors at play as well.

For the last five years we have been hearing that fresh investment is not happening. How can growth then happen without fresh investment. We have been growing then on the momentum of earlier investment and expansion which is now slowly petering out. Meaningful additional investments could happen only if large infrastructure projects are being launched. Alternatively, green field projects and industries are being set up or large scale services units are coming up.

Any of these will call for land acquisition, which has been put deep in the back burner. We have not heard a word about that wonderfully complex land acquisition act draft which has never been even considered for implementation. Without at least some agreement on minimal land allotment for new industries, fresh mines, power projects, infrastructure facilities, investment rate cannot rise and along with that overall growth and development.

Lastly, and as it is customarily said, but not the least, government has got into a mind-frame of fiscal puritanism. Finance ministers have become obsessed with maintaining fiscal deficit ratio to GDP whatever comes in the way. Fiscal prudence is no doubt good; but when fiscal targets are cast in iron frame, it is recipe for disaster. An earlier finance minister, P Chidmabaram, had mostly effectively demonstrated it when his fiscal rectitude had ushered in a short recession.

Maybe, we are about to witness another of that episode. Finance minister Sitharaman’s claim of meeting the fiscal deficit target of 3 per cent when revenue trends are showing a reverse course is an exercise in futility. Instead, fiscal deficit should be counter-cyclical and at times should even breach the target in the interest of stability in economic activity. Launching the ED or the ITOs to intimidate people to pay up taxes cannot create confidence.

Above all, as is being admittedly widely now a days, business failure is not tantamount to committing fraud. Businesses could fail for genuine reasons and funds lent to such businesses could be locked or even lost. However, victimising such borrowers or industries does not create an atmosphere conducive to growth and development. Failed businesses and businessmen should get chance to re-build and make good old dues.

With just a little bit of adjustments, the economy can spring back to life again. There is absolutely no secular slow down in India at all. (IPA Service)