Our country's economic and financial health in the last 18 to 24 months has become a matter of serious concern for the government, the opposition, political parties and the common man, looking at the high inflation rate, low employment generation rate, ebbing investment rate and lastly but certainly not the least rising poverty of the already poor.

Merely apportioning blame on the government alone would not be very fair because price rise and inflation are the result of spiraling oil prices in the Middle East, however policies followed by the government are also to blame. India according to the new estimates by the World Bank had 456 million people or about 42 percent of the population living below the $ 1.25 a day mark. The note points out that while India had 421 million that number had gone up not down to 456 million in 2005. Thus, while there has been a decline in the poverty ratio, the ranks of the poor are still swelling.

The new international poverty line has been arrived at as the average poverty line found in the poorest ten to twenty countries, the briefing note adds. The estimates are sobering not just for India but the whole developing world as a whole, as they reveal higher levels of poverty than earlier estimated.

There is, however a significant mismatch between the Indian government's official poverty estimates in 2004-05, which were to the tune of 201.72 million people or 27.5 percent of the total population. However, unlike the World Bank figures, India's official estimate is based on the average calorie intake per day as opposed to average daily wages. Chief Statician of India Pranab Sen has explained that the Government does not accept the World Bank estimate of poverty since it is based on a single-figure formula, which is not suited to the Indian situation. It does not take into account the price differentials between urban and rural areas or even between different states.

Moody's Group the international economic research company has projected that India's economic growth would decelerate to 7.9 percent in the current fiscal from 9 percent in the 2007-08, in the backdrop of rising interest rates and slow credit growth. Led by an easing domestic demand, the private consumption growth is also likely to decline to about 5 percent, according to Moody's economists. Strong inflation will also squeeze household budgets, hurting consumption growth in real terms, they have felt.

However, next year the situation is likely to improve with the economy rebounding mildly, the rating agency has said. Earlier in August 08 the Prime Minister's Economic Advisory Council had made a similar forecast and said the GDP growth for the year is expected to slide to 7.7 percent. Think Tank National Committee for Applied Economic Research had said economic growth of the country would be at 7.6 percent. Meanwhile, the research arm of leading economic magazine Economist has estimated India's economic growth rate at even lesser – 7.5 percent this financial year.

Unfortunately, that is not the end of story. Apex industry chamber Confederation of Indian Industry (CII) has recently warned that rising interest rates would hurt new investments even though resources to the tune of US$ 700 billion are in the pipeline in the next three years. While the existing investments in the pipeline were being adhered to, may be newer projects which were at the concept stage, which were on the backburner may not come to the front burner, CII president K V Kamath said after a meeting with Finance Minister P Chidambaram in end August.

Mr. Kamath has said investors were concerned whether high inflation would mean that consumer demand would slow down, whether high interest would mean that consumers could not afford to buy or purchase what they wanted to purchase. The CII president said he did not see an easing of monetary tightening so long as high inflation persists. Looking at yet another aspect of improving India's economic health a recent study by IL & FS Cluster Development Initiative and FICCI suggests that the challenge of matching growing employment opportunities with an increasing young labour force, is dependent upon the country's ability to make the labour employable in line with industry requirements.

According to the joint study, 156 million job opportunities will be thrown open by services sector and industry during 2006-2016. The study notes that during this period, 800 million people will fall in the productive age group requiring skills training. Failing which that many jobs will remain unfilled or that many youth unemployed. To meet the current inadequacies in the training delivery mechanism, the study has recommended several measures aimed at creating an enabling environment. The study estimates that the 20 high growth and employment sectors identified by the Planning Commission will generate around 60 million job opportunities by 2012. Noting that the need for institutional infrastructure for skill development would be enormous, the study recommended that government policy should support the emergence of a large number of profit skill development for sustainable incomes.

In the short term, India has a tough call ahead with inflation rising upto almost 13 percent in the second week of August. By all accounts, especially projections made by Prime Minister's Economic Advisory Council, that it will certainly rise to 13 percent by October and the inflationary spiral is likely to persist till the third week of November, before it starts softening during the fourth quarter of 2008-09.

The runaway rise in prices – no doubt in keeping with global inflation owing to surging prices of crude and food commodities – has come at a time when general elections are due in 2009. Despite precautionary and preventive measures along with Reserve Bank of India, to contain inflationary trend, the results have not been up to the mark, and it is very likely that the present government at the Centre will have to pay a price in terms of electoral support, unless an economic miracle happens.

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