The Hindu : 'Huge investments needed for 8 p.c. growth rate'

Online edition of India's National Newspaper
Tuesday, Nov 26, 2002

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'Huge investments needed for 8 p.c. growth rate'

By Our Special Correspondent

NEW DELHI Nov. 25. The former Finance Minister, P. Chidambaram, today underlined the need for a rise in savings, massive investments, and cut in wasteful expenditure to achieve the target of eight per cent growth rate annually.

Huge investments were needed in agriculture and manufacturing which were not forthcoming at present. Addressing the plenary session of the Indian Economic Summit 2002 organised by the World Economic Forum and the Confederation of Indian Industry (CII), he was critical of the Government for not stepping up the pace of economic reforms, saying not a single initiative had been taken in the last 12 months. There had only been intentions and announcements but no concrete action.

The Minister of State for Law and Justice, Ravi Shankar Prasad, said that the days of free electricity were over as Chief Ministers had realised it was no longer possible to give away power to achieve political ends.

He presented a report card for the last few years, highlighting the areas that had a promising future including services, biotechnology, housing and tourism. On the power sector, he said several initiatives had been taken for reforms.

Mr. Prasad suggested that a wide-ranging debate be carried out on how to make reforms relevant in a democratic context.

In contrast to this optimistic scenario, the Secretary of the Economics Review Committee of the Congress, Jairam Ramesh, said that ``India needs another external crisis to spur economic reforms. Reforms happened in India out of compulsion and not conviction.''

Besides, he felt the country lacked governance capability to implement reforms and move on to a higher growth path.

He attributed this to several factors, including the nature of political financing, adversarial nature of institutions that harm consensus-building, the dysfunctional nature of incentives in the administrative system and fiscal bankruptcy.

Robert E. Kennedy, Associate Professor at the Harvard Graduate School of Business Administration, felt that India had all the elements to attain a higher growth rate but had to work on raising their allocative efficiency.

He said the political decision to implement economic reforms did not come from being able to build consensus but from the ability to take some painful decisions.

On the other hand, Jagdish Shettigar, a member of the Prime Minister's Economic Advisory Council, felt that political consensus was most crucial for economic reforms.

Otherwise, measures such as agricultural and labour reforms would be projected as anti-farmer or anti-labour when in reality, the reverse was true, he said.

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