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5 major challenges for Indian economy
Wednesday, 07 July 2004, 19:30 IST
NEW DELHI: Curbing inflation, sustaining high economic growth, boosting the farm sector, expanding industry and containing fiscal deficit are five major challenges for India, the government's Economic Survey has said.
These challenges require bold action from the government, particularly in areas such as fiscal adjustment and tax reforms, said the annual report card tabled in parliament by Finance Minister P. Chidambaram in the Lok Sabha Wednesday.
"Any misguided scepticism about the resolve behind the declared goals of fiscal consolidation should be scotched by bold actions," said the survey prepared by chief economic advisor in finance ministry Ashok Lahiri.
According to the survey, India's economic growth, which has steadily risen since 1979, needed to be accelerated to 7-8 percent by an appropriate mix of policies.
"While India has an impressive 23-year record of growth of 5.7 percent per year, the potential for even better performance is large. Many countries in East Asia have sustained higher rates of growth over periods longer than 23 years."
Noting that one of the essential components for sustaining economic growth was infrastructure, the survey said that the demand-supply gap in areas such as telecom, roads and ports had narrowed since the first half of 1990s.
"But the inadequate availability of these facilities, both in terms of quantity and quality, continues to hinder economic growth. Investment in infrastructure has been grossly inadequate, despite the establishment of specialised financial institutions."
The survey issued a warning on the inflation front. While the surge in global oil prices was unlikely to stifle growth, some of the growth momentum could be dampened if they continue to rule at higher levels.
The survey said that the government must enable the farm sector to realise its full potential to not only benefit farmers and lift the rural economy but also give a boost to the overall economic growth.
It not only suggested a diversification away from cereals to high-value and labour-intensive agriculture but also called for a rethink on the system of minimum support price for farm produce.
The decline in capital formation for agriculture to 1.3 percent of the gross domestic product (GDP) from 1.9 percent is a matter of concern, the survey said.
It also said that the annual industrial growth has been disappointing since 1995-96 and suggested measures such as higher foreign direct investment, de-reservation of the small-scale sector and lower customs duty as possible ways to overcome the problem.
The survey, presented a day ahead of the national budget for 2004-05, also called for sustaining the reforms in tax and expenditure reform to achieve the specified milestones in fiscal adjustment.
"The rewards of fiscal consolidation will be the creation of more fiscal space for augmenting the expenditure on social and physical infrastructure and the laying of a social foundation for macro-economic stability."
Source: IANS
Source: IANS