Show me the money: (From L to R, top row) NIPFP's I. Rajaraman, Finance Commission's S. Acharya, CRISIL's S. Kokarn, IT & Communications Minister D. Maran, India Today's Aroon Purie and AB Group's Ranade; (bottom) RGICS' B. Debroy, India Today's Prabhu Chawla, J. Ramesh and Tata Group's S. Roy

Are companies in India finally opening their purse strings after eight long years of near investment drought? And if yes, can that boom be sustained? These and such other vexed questions were hotly debated by six eminent economists of the Board of India Today Economists (bite) at its recently concluded sixth quarterly meeting in New Delhi. The panel was moderated by Jairam Ramesh, Secretary (Economic Affairs Department), Congress Party, and Dayanidhi Maran, it and Communications Minister, was the chief guest.

The verdict was near unanimous: it is too early to pop the bubbly, never mind that the front pages of financial dailies were full of stories about fresh investments by Indian corporates. The six economists were also not impressed enough with the better-than-expected economic growth in the first five months of this fiscal (April to August), when the Index of Industrial Production (IIP), an indicator of industrial activity, jumped 7.9 per cent. "I would only be convinced of a boom if I see 10 investments worth Rs 5,000-crore each this year. But that's not happening," said Ajit Ranade, Chief Economist at the Aditya Birla Group. Interestingly enough, the Mumbai-based commodities giant itself has investment plans of Rs 20,000 crore in Orissa and Gujarat over the next five years but, as Ranade pointed out, most of the money would be spent on "de-bottlenecking", that is streamlining existing capacities, rather than new ventures.

For Indira Rajaraman, RBI Professor at the National Institute of Public Finance and Policy (NIPFP), an investment figure of Rs 60,000 crore a year-around 2 per cent of the GDP-or more alone would signal a boom. But her real worry was that even in these good times, the construction industry had reported a slowdown in the first quarter of this year compared to the first quarter of last year. Bibek Debroy, Director of the Rajiv Gandhi Institute of Contemporary Studies (RGICS), trashed all suggestions of an investment boom, saying that it was "exceedingly premature to talk of a boom on the basis of one quarter results".

SUBIR GOKARN Chief Economist, Crisil GDP: 5.6% INFLATION: 6% INTEREST RATE: 6.5% EXCHANGE RATE: Rs 46/$ JOB SCENARIO: Weak	INDIRA RAJARAMAN RBI Professor, NIPFP GDP: 6% INFLATION: 7% INTEREST RATE: 7.5% EXCHANGE RATE: Rs 46/$ JOB SCENARIO: Not bright
SHANKAR ACHARYA Member, 12th Finance Commission GDP: 5.5 to 6% INFLATION: 6.5% INTEREST RATE: 7.5% EXCHANGE RATE: Rs 45-47/$ JOB SCENARIO: Weak

Subir Gokarn, Chief Economist at the credit rating agency CRISIL and one of the more optimistic experts on the panel, argued that the huge 27 per cent jump in growth in machinery and equipment (a fairly heavyweight in the IIP) in the first five months, compared to zero or negative growth in September 2003, was clearly an indication of investment, going by the strict definition of investment. "It is certainly a positive indicator both from the short-term and long-term growth perspective since it is contributing to demand," Gokarn said.

The significant growth in this sector was not a strong enough indicator, felt Shankar Acharya, Member, Twelfth Finance Com-mission and former economic adviser to the Government of India. That growth needed to be augmented with other positive signals such as substantial growth in non-oil imports, particularly in the capital goods sector, and enhanced credit flow from banks and domestic financial institutions to the corporate sector, Acharya added. In effect, as Ramesh, Rajya Sabha member and moderator of the bite panel, commented, though there were some preliminary indicators of hope, it was too early to dub it as a broad-based and sustainable revival.

But how does sustain this "nascent investment boom"? Only through greater public sector investment, felt bite economists. The reason, as Rajaraman of NIPFP pointed out, was that Indian corporates were still hesitant of entering into areas like rural infrastructure, where the returns on investments are either insufficient or too risky. But getting public sector investment was easier said than done, felt some of Rajaraman's co-panellists, since the states that were responsible for making the investments, were either bankrupt or badly stressed.

Rajaraman, however, felt that there were ways to circumvent the problem of insufficient funds. The Central government could, she suggested, either write-off the interest payments of the state thereby allowing them to use that money for developmental purposes or open an escrow account to be used only for creating real assets. Additional funds, according to Rajaraman, could be generated by allowing the Panchayats to tax agricultural income.

SIDDHARTHA ROY Chief Economist, Tata Group GDP: 6% INFLATION: 7% INTEREST RATE: 7% EXCHANGE RATE: Rs 46/$ JOB SCENARIO: Slightly better