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Economic recovery: when and how

BS Economy Bureau

When will the economy start recovering?

While economists say the downturn is expected to bottom out by the end of the current calendar year and a recovery should ensue by January next year, government officials are more optimistic and feel that the recovery would begin in the second half of the current fiscal year.

While admitting that the current state of economy was worrying, economists argued that the current slowdown reflected some fundamental structural changes in the Indian economy, after ten years of reforms.

"For the first time ever, exogenous shocks have combined with the prevalence of business cycles," says Pronab Sen, advisor in the Planning Commission.

Former chief economic advisor Shankar Acharya says: "There are two different things going on at the moment. There is a longer term reduction in the rate of growth that has occurred some time after 1996-97. On top of that what we are seeing is a separate effect of a cyclical slowdown in the global economy."

According to Ashok Lahiri, director of the National Institute of Public Finance and Policy, the infrastructure constraints have begun to impose a drag on the system.

"It is like trying to do more than 60 km/hr in a vintage car," he said.

Rakesh Mohan, advisor to the finance minister, says: "The various measures taken in the Budget-the overall reduction in taxes and the reduction in interest rates-should ensure a pick-up in the second half of the current year. And, confidence levels would be boosted with the implementation of the various reform measures on the anvil."

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