MUMBAI -- The Indian economy in 2002 is in the stranglehold of deflationary pressures, investment pessimism, unemployment and lower growth.

Those are the broad conclusions of the `India development report 2002' (IDR) brought out by the Mumbai-based Indira Gandhi Institute of Development Research and Published by Oxford University Press, Mumbai.

Reserve Bank of India Governor Bimal Jalan, at a function in Mumbai recently, released the report which is edited by noted economists Kirit S. Parikh and R. Radhakrishna and which says the high average annual growth rate of 7.7 percent from 1993-94 to 1995-96 kindled the hope that the economy, spurred by reforms, had entered a higher growth trajectory.

However, the hope has not been borne out, says the report, adding that social exclusion, regional disparities and high levels of poverty and unemployment are causes for continuing concern.

In his overview of `ten years of reforms,' Parikh notes that despite continuing progress in literacy, the country has as many illiterates as the "population aged seven years and above at the time of independence in 1947." Life expectancy and infant mortality have progressed in the 1990s (62.4 years and 71 per thousand respectively) as opposed to the 1980s (54.4 years and 114 per thousand), but expenditure in health and education as a percentage of the GDP in the late 1990s is just a little over the 1.6 percent of the 1980s.

Parikh refers to the present food stocks of 59.1 million tons in a country with more than 200 million persons below the poverty line as an `absurdity'. His solution is to lower procurement prices given to the powerful farm lobby so as to boost consumer demand.

Industrial output has been hurt by the slow growth in agricultural GDP, which was up by only 0.6 percent in 1999-00 and 0.3 percent in 2000-01.

The global downturn has also hit exports. In 2000-01, exports were nine percent of gdp and grew 26.4 percent in rupee terms over 1999-00, but grew only 1.9 percent in the first half of 2001-02.

Parikh notes that the fall in investment is mainly due to the fall in public savings. Public savings were 2.4 percent of GDP over 1985-90 and fell to 1.5 percent of gdp over 1990-98. They fell by 0.8 percent in 1999-00 and further by 1.2 percent in 2000-01.

The major cause was the pay revision for central government staff in 1997. The implications were apparent in 1999-00 when government expenditure rose to 2.2 percent of GDP from 1.6 percent in 1996-97.

Kirit Parikh is professor emeritus at the Indira Gandhi Institute of Development Research (IGIDR). He is a member of the Prime Minister's Economic Advisory Council.

The Igidr is an autonomous advanced research institute as well as an esteemed university established by the RBI in 1987.