Political stability and economic performance

N. Vaghul: We need to be very clear about GDP growth and industrial growth. GDP growth in India does not reflect industrial growth because industry has a relatively low weightage in GDP. So we could be completely misled into identifying industry performance with GDP growth.

For example, in 1998-99, GDP growth rate was around 5.8 per cent by government estimates. But, I believe, when the final figures are released it could be much higher because we have underestimated agricultural performance and perhaps not fully collated the performance of the service sector. But our industrial growth, according to some estimates, has been only around 3.8 per cent. That is not robust growth.

There is also the question of exactly where this growth has taken place. We have three segments -- mining, manufacturing and electricity. Our performance in electricity has been very poor. In manufacturing, again, I don't think we have made any major strides.

The key to looking at industry performance lies in two or three things. One is whether there have been any new investments - I don't see any new investments getting made. The second is the level of business confidence - which is purely empirical, in the sense that when you go and talk to people and ask them what they feel about the economy today, they reflect their own individual concern. People whose sales are booming tend to take a very optimistic view of the state of the economy. When there are more people taking a pessimistic view of the economy you know the economy is not doing very well.

The third and most important factor is that we are in the midst of change to a new world trading regime. In another three or four years' time, most of our tariff walls would have been dismantled, and India would have to integrate itself with the rest of the world.

I don't think India has any choice today -- we cannot turn back to the pre-1990 policies. We have to keep moving forward. The issue is how fast we move. That also to a large extent would be determined by international commitments which we have made to the World Trade Organisation.