Despite the government claims of 'India Shining,' a leading survey has pointed towards low corporate investment, poor policy and high budget deficit which will constrain growth.
The survey released by London-based weekly, The Economist, also argues that the state government finances badly need rehabilitation if the rural majority is to get the much-needed investment.
"Much of the current optimism is overdone and based on hope rather than achievement. What is shining is the hope of the people to get their lot better," Simon Long, who conducted the survey, said.
Experience of the past 10 years suggests there is an even chance that the deficit will constrain growth even more than it does at present, rather than that growth will reduce deficit, the 14-page survey said.
It said the public-sector budget deficit has been running at around 10 per cent of the GDP for the past six years, a very high level by international standards.
The fear is that this deficit, described by the survey as an 'embarrassing foul smell,' might lead to higher inflation and that the government's demand for funds will push up interest rates, crowd out private investment, weaken the financial system and leave the economy vulnerable if hit by a big macroeconomic shock.
More than half of the deficit is accounted for by the Centre, most of the rest by profligate states.
Shining brighter than any GDP growth target is the prospect of some lasting reconciliation with Pakistan, it added.
The survey has a separate section on Bihar -- 'An area of Darkness', describing it as a byword for the worst of India, of widespread and inescapable poverty and corrupt politicians indistinguishable from the mafia dons they patronise.
One of Bihar's biggest difficulties is its surfeit of labour and the prospect of ever-increasing numbers of frustrated Bihari migrants roaming the country in search of work is one of the reason's why the state's troubles are India's too, it said adding most landless Bihari villagers are at the bottom of the heap.
Looking at the bright side, the survey, however, concedes that India's economy is revving up and 8 per cent economic growth is well within reach. The economy had bettered the so-called 'Hindu rate of growth' of around 3.5 per cent of 1972-1982 and grew at six per cent in 1992-2002.
It describes the 'India is shining' contention as a propaganda campaign but at the same time argues this is indeed a moment of shining economic 'opportunity' and if the ruling coalition returns to power it should be better placed to take advantage of it, and pursue the necessary reform.
There is no shortage of good economic news with 8.4 per cent GDP growth in the third quarter of 2003-04.
Foreign exchange reserves stood at record levels of more than $100 billion, stock market had recorded its biggest annual rise in 12 years, inflation and interest rates were low, current account was in balance.
But most of the apparent good news can, seem reason to worry; the bulging workforce becomes a looming unemployment crisis, booming infotech industry, a dangerously isolated enclave and even subdued inflation and interest rates signals of weak demand and lack of investment.