It has become a journalistic cliche to club India and China together, based on the last four years' GDP growth in India. While many are expecting a fall in growth rate in the current year, Dr Rangarajan, Dr Ahluwalia and Mr Chidambaram have reiterated confidence in 8-9 per cent growth over the next decade or so, whatever the immediate problems.

Savings and investment rates have gone up sharply and so has efficiency in the use of capital. And yet, financial numbers alone can hardly guarantee growth; they are a necessary condition but are they sufficient?

To recall some economic history, in the late 1960s and early 1970s there was great optimism about Latin America's prospects: That, as well as the juicy fees and margins, persuaded banks to lend hundreds of billions of dollars to the region. What happened later is too well known.

In the 1980s, the Japanese economy was widely regarded as the world's most efficient, and with limitless prospects. The Nikkie Index is now about a third of the level then reached after almost two decades of economic stagnanation. The point is that no country has a God-given right to grow at near-double digits.

Quite often, confidence is at its highest point just before a fundamental change occurs: Consider the bullish view on the Kashmir situation less than three months back and the subsequent developments. Is there a chance that optimism about Indian growth may prove short-lived, that the long-term gap between India and China would be as much as in the tally of Olympic medals?

Consider, first, the huge and increasingly-unaffordable burden of subsidies. The prime minister has voiced his concerns umpteen times but seems powerless to do anything; in fact, during his Independence Day address, he reiterated the commitment to subsidies.

As finance minister, he had eliminated subsidies on exports in one stroke, along with a devaluation of the rupee. There was not even a whisper of protest. Surely something similar could have been done in relation, for example, to the LPG subsidy to the middle class, or limiting perquisites of government servants (cars, houses, etc) when the salary scales were increased, that too well beyond the recommendations of the Pay Commission?

Consider also what is happening in relation to major industrial investments. The confrontation in Singur is but one example. POSCO, Vedanta, etc, have had to go right up to the Supreme Court on the issue of land.

The Supreme Court has given a ruling. But one is not very optimistic about whether that will be enough for the project construction work to start and whether, even thereafter, it would be allowed to continue smoothly.

Perhaps the time is fast coming when major investors, Indian and foreign, will prefer to avoid India and go elsewhere. If that happens on any significant scale, where will the growth rate go?

Add to that the weak infrastructure, huge power shortages, sometimes chaotic policy twists, generally-poor governance and the all-pervasive corruption and the mess in education policy created by a doddering minister.

The growing income inequality is a social time bomb, potentially much more destructive than any terrorist attack. The bizarre spectacle of families living on footpaths, with a plastic sheet for a roof, within 25 meters of posh real estate costing Rs 25,000 a square-foot; the 500 canine weddings celebrated in pomp and finery in Delhi on August 30 even as a large proportion of Indians live below the poverty line; the gated communities to which the well-off are migrating; the ease with which agitators can cut-off surface communications; and the communal tensions unleashed by reservations and otherwise. There has to be a reaction to this somewhere: Perhaps that is why Naxalism is gaining strength daily.

Perhaps our biggest weakness is the unwillingness to accept change - the fact is that any improvement will need change; that every change will not affect everybody equally or positively; that we nevertheless need to accept it in the interest of "the greatest good of the largest number". Will we? Singur, the twist and turns on retail and SEZs, to take only two examples, do not give much confidence.

I do hope that my pessimism is wrong and that we will continue to grow at 8-9 per cent per annum in the foreseeable future, as many seem to believe, including private equity investors pouring money into India. (Or is that another example of the herd instinct?)

That we need 10 per cent growth to eliminate poverty is undeniable. Whether we will get it without better governance and without a political consensus on growth policy, remains a big question.

Our Kashmir policy

We will not negotiate with the separatists unless normalcy is restored; when it is, the policy will go back to sleep. After all, we do not accept that something like a "Kashmir problem" exists. Remember, it was our refusal to acknowledge the problem that broke the Vajpayee-Musharraf Summit?