What Can They Talk With the Kashmir cease-fire floundering amid repeated cross-border firing, the Centre takes a major initiative to resume a dialogue with Pakistan. However, the ghosts of Lahore loom over the horizon, raising doubts about any positive outcome in the new attempt at peace-making.

State Of Mistrust
With the fall of the Koijam government, a Samata-BJP battle has erupted in Manipur. But the stakes seem to be at the Centre.

Going By The Laws
Om Prakash Chautala has launched a flurry of criminal cases against his opponents in what is being seen as political vendetta.

Badland Badshah
As India's most wanted politician Mohammed Shahabuddin evades arrest, more details come out on his alleged links with Kashmiri militants and Pakistani agents.

Crash Landing
The MD's suspension has highlighted the rot in India's flag carrier.

ECONOMY: FORECAST

What's On The Cards?

Neither the best of times nor the worst of times, the year 2001-02 is likely to see India in a 6 per cent growth trap, predicts an INDIA TODAY-NCAER study.

By Rohit Saran

Boom or doom? What do the stars foretell for the Indian economy in the year 2001-02? Caught in a "growth trap" for the past four years, national income as measured by the gross domestic product (GDP) has refused to rise faster than an average rate of 6 per cent a year--now dubbed the new Hindu rate of growth. The country is getting impatient for a higher economic growth. For the common man higher growth holds the key to more jobs and higher incomes. For companies a boost in economic growth is imperative to ignite sales and profits. And for the Government a higher growth would deliver benefits ranging from higher tax revenues to a more satisfied electorate.

GROSS DOMESTIC PRODUCT The GDP growth will post a marginal recovery		AGRICULTURE Value of agriculture output will rebound from low base
% annual growth in GDP			% annual growth in value of output
INDUSTRY GROWTH Industrial production too will show improvement		SERVICES GROWTH Services will just about retain its past growth
% annual growth

Yet, 2001-02 may not be the year to fulfil so many expectations. Stagnant industrial growth in the past two years has crippled job opportunities in urban India. The rural economy is reeling under a decline in foodgrain production for two continuous years which has dented incomes and living standards of some 60 per cent Indians. The global economy too is certain to shed growth in 2001. But the rush of bad news has made some optimists feel good. Their logic: it is darkest before dawn. That is, things can't get any worse and the economy can only get better.

It is uncertain times like these that make forecasting both difficult and relevant. For, it is at such times that people look for a future direction more than they would during stable and good times. That is why India Today commissioned the Delhi-based economic think tank National Council for Applied Economic Research (NCAER) to do some crystal gazing on the future course of the economy. To supplement that, three experts on employment, industry and agriculture were also invited to present their diagnoses and prognoses (see columns).

The accuracy of a forecast hinges on the correctness of the assumptions that underlie the forecast. The NCAER forecast is based on the following assumptions:

• Monsoons will be normal. By the time you read this forecast, the Indian Meteorological Division (IMD) is likely to have predicted yet another normal monsoon. That will make 2001-02 the 13th consecutive year of normal monsoon. Since the rainfall during last year's monsoon (June-September 2000) was 8 per cent below normal, a normal monsoon this year will imply at least 8 per cent more rainfall. Prices of agriculture products are assumed to rule higher by 5 per cent than last year.

• World GDP growth rate will fall from 4.8 per cent in 2000 to 3.2 per cent in 2001, a slowdown of 1.6 per cent. Foreign direct investment inflows will be $2 billion in 2001-02 and the rupee will depreciate by 6.6 per cent against the US dollar during the year.

• Effective excise duty rates will remain unchanged, while customs duty will decline by 4 per cent with the abolition of surcharge in this year's budget. The budget also withdrew the surcharge on corporate income tax. That is assumed to yield Rs 3,000 crore to the private corporate sector, which will invest 50 per cent of that amount.

• The Central Government will raise Rs 7,000 crore from disinvestments (the Budget target is Rs 12,000 crore), and lending rates will decline by 1 percentage point.

• Government investment will rise by 11 per cent in 2001-02 over the previous year's level, while the Government's consumption spending (e.g. administrative expenses, salaries) will rise by 3 per cent. These assumptions are based on the budget proposals. The investment spending assumption is in current price terms while consumption spending is in constant prices.

• The prices of petroleum products and fertilisers will not change.

The economy won't generate many new jobs in 2001-02.

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