McKinsey formula to achieve 10 p.c. growth

By Our Special Correspondent

NEW DELHI, SEPT. 6. The Prime Minister, Mr. Atal Behari Vajpayee, witnessed a presentation today by the international consultants, McKinsey and Company, which basically projected that the Indian economy could grow at the rate of 10 per cent per annum, provided some corrective steps were taken.

Today's presentation was part of the exercise launched by the Prime Minister to find out ways and means of re-working the economy. On Tuesday, Mr. Vajpayee had a marathon meeting with 14 of his Cabinet colleagues, followed by a presentation on Wednesday by the Ministry of Road Transport. In the coming days, more such interactions are planned, including with trade and industry representatives and with economists.

The basic thrust of the McKinsey report was the Indian economy was not being held back because of scarcity of resources, either human or capital, but barriers which prevent these resources from being utilised efficiently.

The report also emphasises the fact that to reach the 10 per cent annual growth mark by 2005, the Government would have to ensure rapid implementation of a 13-point programme over the next two- three years. McKinsey has also suggested that the Prime Minister should make the programme his top priority and work with a small team of senior Cabinet Ministers to oversee its implementation.

The 13-point agenda listed in the McKinsey report is not something original, but has been stated by various expert groups including the Planning Commission. The suggestions include dereservation of all products manufactured by the small-scale sector, starting with 68 sectors accounting for 80 per cent of the output of the small units. The report calls for equalisation of sales tax and excise duties for all categories of players in each sector and strengthening of enforcement.

There are suggestions for establishing effective regulatory framework and strong regulatory bodies, removal of all licensing and quasi-licensing that restrict number of players into any segment of the economy, reduction in import duties on all items to 10 per cent over five years and removal of the ban on foreign direct investment in the retail sector and allowing unrestricted foreign direct investment in all sectors.

The McKinsey report also calls for fast track courts for disposal of property cases, computerisation of land records, freeing all property from constraints on sale and removing limits on poverty ownership (removal of Urban Land Ceiling Act). Raising of property taxes and user charges for municipal services and cut in stamp duty and reforms in tenancy laws to allow rents to move up are the other suggestions.

The report has called for reforms in labour laws, for disinvestment in all Central and State Government owned companies, for privatising the power sector and transferring management of existing transport infrastructure to private players and contracting out construction and management of new infrastructure to the private sector. In the agriculture sector, the suggestion is for strengthening of extension services to help farmers improve yields.

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