Doing the right things is not easy, is it?

Rajiv Kumar, Senior Fellow at Centre for Policy Research in Delhi, thinks that India should not get carried away by the growth figures of our GDP. Our economy grew at 7.1% in the first quarter, from April to June, which was sharply lower than the 7.9% of the previous quarter of January to March. We need to grow at 8% plus to create enough jobs to lift the hundreds of millions stuck in poverty. To relieve some of the gloom, Gross Value Added grew at 7.3% compared to 7.4% of the previous quarter. Manufacturing grew by 9.1% and services grew by 9.6%. According to Citi this year's good monsoon will add $80 billion to rural spending, which should add 0.7-1% to GDP growth. However, things are never quite as logical in India. Bumper harvest results in a fall in prices because we do not have adequate storage facilities. Farmers are forced to sell their produce at below cost price which means that they cannot pay off their loans and end up committing suicide. The government pays a Minimum Support Price for 25 crops to encourage farmers to grow them. The debate is about whether paying a guaranteed lower price for agricultural commodities raises the price of food, causing inflation, or whether encouraging farmers to increase cultivation of essential products decreases prices by increasing supply. Rajiv Kumar highlights 2 figures which should cause alarm. Gross Fixed Capital Formation, or GFCF, which is a broad indicator of investment in plant and machinery, fell by 3.1% in the April-June quarter. GFCF increased by 24.5% in 2011-12 when the GDP grew by 7%. Commercial bank lending to non-food sector grew by just 8.3% in August this year, compared to a peak of 38.4% in 2005-06. These two figures imply lack of investment due to a deep distress in banks and industry, which is ominous because job creation is vital to avoid social conflict. He has given a few suggestions to remedy the situation. Public housing for urban and landless laborers. This will create jobs in construction and improve demand. But where? Laborers are itinerant, moving from one place to another in search of employment. Houses can be made with cheap technology but land is too expensive to build everywhere. Increasing tourism in India. For that we need world class infrastructure, cleanliness and safety for tourists. The Prime Minister has launched a Swacch Bharat, or Clean India, Abhiyan but a walk through any neighborhood in the capital city, Delhi, will show broken roads, with filth strewn around. Exports must increase. For all our chest thumping we cannot grow with exports a paltry 1.6% of global exports. For that we need a weaker rupee but that will increase the price of imports and cause inflation, forcing the RBI to increase interest rate, which is anathema to our politicians. The RBI is busy supporting the rupee even now. Not so easy is it?