Indian economic forecast March 1993

Abstract

Although not spelt out by the Finance Minister as preparing ground for the EFF/ESAF loan from the IMF, it is a path-breaking budget with a strong emphasis on restructuring the economy and the augmenting supply side of the economy. The medium-term funding facility from the IMF/WB with concessional loan would act as insurance and paper over the ripples generated in the goods market and financial assets market due to restructuring of the economy. To ameliorate short term consequences on labor, the labor market reforms are being handled in a politically deft manner. The economic strategy in the medium term is quite clear, go for growth and supply side incentives and push for structural reform. Monetary policy of the government is quite tight and as inflation falls rapidly the government should bring down interest rates quickly to maintain the momentum of private sector investment to enhance productive capacity of the economy. The success of the reform programmes hinges on sustained growth of agricultural and non-agricultural sectors which is inexorable linked to productive investment in these sectors.