If the recently released second quarterly review of the Indian economy (2003-04), dubbed for some strange reason as the 'Mid-Year Review', is a true indicator of the nation's economy, then the nation as a whole should be rejoicing. After all, we're back to the 7 per cent-plus high-growth phase last witnessed in 1994-95, 1995-96 and 1997-98 and never thereafter.

Ever since the monsoon washed off last year's bad memories, as it were, the government and independent research bodies have been vying with one another to better Indian growth prospects. While the government has raised India's GDP growth projection from 5.6 per cent to 7 per cent plus this year, CMIE and NCAER have also upped the flag from 6.5 to 7.4 per cent and 6 to 7 per cent, respectively.

But is that sufficient cause for rejoicing? No. The news is not just that after two years of dismal growth, Indian agriculture is again poised to grow at 8 per cent (with foodgrain likely to touch a record 220 million tonnes). But that this revival is matched by good growth in the industrial and services sectors too, slated to grow at 6 and 7 per cent-plus, respectively. It's a story of all-round growth-after many, many years.

If the agricultural bounty is a direct fallout of the bountiful rains, the industrial revival has much to thank in the falling interest rate regime coupled with a welcome return to capital spending by the government. The construction activity has had its Keynesian multiplier effect, apparently, even if the Prime Minister's highway-building project could do with some speeding up.

Overall, good growth tends to spell happier public finances. Tax collections are up. While direct taxes till September end are up 22 per cent, indirect taxes are up 8.1 per cent. No wonder the Revenue Secretary Vineeta Rai seems confident that budget revenue targets will be more than met. Meanwhile, India's foreign exchange reserves are approaching the $100-billion summit, even as inflation remains subdued.

Time, then, to pop the bubbly? Spout whatever expletives you choose, but we would like to maintain our whoop-retentive image for a bit more. The Indian economy remains vulnerable to some pressure points that BT has consistently drawn attention to.

You guessed right-the fissured fisc. India's fiscal gap has deteriorated sharply during the first six months of 2003-04. Total expenditure of Rs 2,17,101 crore in the first half of this year constituted 49.5 per cent of the Budget estimates, much higher than the corresponding figure of 39.6 per cent last year. Even more worrying is the spurt in non-plan expenditure of the government. At Rs 1,70,211 crore, or 53.6 per cent of the Budget Estimates for the first half, this figure stands at Rs 50,046 crore more than last year's. This borders on profligacy. Also, the bumper foodgrain crop has its own costs, given how highly subsidised the sector remains. The food bill (April-September) is Rs 16,006 crore, fertiliser bill Rs 6,703 crore. Contrast these with the petroleum subsidy bill of Rs 2,381 crore.

The shortfall in disinvestment receipts (at most Rs 400 crore, against a budgeted target of Rs 13,200 crore) just adds to those worry wrinkles. Then, there's the export sector that has seen growth drop from a jaunty 18.1 per cent in the first half of last year to just around 10 per cent this year (only partly because of the rupee's rise).

Booms, left unbacked, are notoriously short-lived. So here's the hard news: for all the excitement, the economy cannot really get away on the cheap-without further reform. The farm sector needs a total regulatory overhaul if it is not to remain hostage to the monsoon rains. Limits on foreign investment need a rethink. Labour laws, particularly the Contract Labour Act, need urgent attention. The small-scale sector policy needs junking. Small savings schemes and the like need recalibration to suit reality. The list goes on...