Mar 21, 2008

India Prospects - A 10 years of high growth rate is achievable : FM

Dispelling doubts about the sustainability of the country's economic performance, finance minister P Chidambaram has said India's growth story is here to stay. Stepping up public and private investment, protecting price lines, ensuring smooth delivery of goods & services and completing projects without time and cost overruns is part of his prescription to ensure high growth rates, beyond 8%, over 5-10 years.

"I believe investment boom will continue for the next five years. The principle driver of India's economic growth is investment. We should be ambitious. I'm very optimistic that if we can hold the price line, get investments, improve production and implementation, 5-10 years of high growth is achievable," he said.

Pointing out that the Budget had addressed people's aspiration to consume more by leaving "more money in their pockets", Mr Chidambaram said the economy should strive to produce more both in the agriculture and manufacturing sectors. He said the country should reduce dependence on import of agri products by producing more wheat, rice, pulses and edible oil.

On the manufacturing side, the FM cautioned the industry against giving in to the temptation of taking advantage of medium-term demand-supply mismatch. "The industry should resist the self-defeating strategy of exploiting medium-term demand-supply mismatch. Instead, they should enhance production to meet demand," he said.

He pointed out that manufacturing, which had a weightage of 52% in the inflation basket, played a significant role in keeping inflation rates high. "The manufacturing sector also has the responsibility of holding the price line," he said.

Another significant challenge the economy faced was of improving delivery. All the capital that was invested would come to naught if the delivery system was not improved. "There exist notorious inefficiencies in delivery of primary education and healthcare," he said. In a bid to get around the delivery problem, the FM said the government had decided to set up a non-profit organisation outside the government to impart skills to the youth.

Delivering projects without cost and time over-runs was an important problem which the economy has to overcome. "Most public sector projects and programmes run beyond the initial estimates of cost and time. If we are able to keep projects within estimates, we will not only get 8-9% growth, we should be way beyond," he said.

Comparing China's growth indicators with India, the finance minister said the gap with China was expanding. He said India had no reason to feel complacent, as it had a lot of catching up to do.