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Lack of political will to hit growth: Chidambaram

BS Economy Bureau in New Delhi

India had the potential to achieve an 8 per cent growth rate, but was unlikely to do so given its economic mismanagement and lack of political will, former Finance Minister P Chidambaram said on Monday.

Speaking at the plenary session on 'A roadmap to success: 8 per cent growth for 20 years' at the India Economic summit, Chidambaram said while the government had made a number of announcements, no concrete step had been taken over the past one year to take the reforms process forward.

While India could achieve higher economic growth, like it did between 1994-96, mismanagement in the economy meant chances of that happening were not too bright, he said, adding that real growth would come from agriculture and manufacturing and neither of those sectors was doing well.

The 8 per cent figure was based on an expected growth of 4 per cent in agriculture and 10 per cent in manufacturing, but over the past five years, those sectors had grown only at 2 per cent and 3.7 per cent respectively, Chidambaram said.

Investments are required in both these sectors in order to push up growth. "The key to ramping up growth is to cut down on expenditure," he said.

Unless more money was put in the hands of the people, along with incentives to save, the desired investment rates would not be achieved, he added.

Bills had been pending in Parliament for the past three years and given the mood currently prevalent, none were likely to be passed this year either, the former finance minister said.

The need for political consensus was highlighted by all the speakers, including Jagdish Shettigar, member of the Prime Minister's Economic Advisory Council, who called for an integrated approach to reforms.

He also said allowing lateral entry of specialists into the administrative system would help reforms.

Robert E Kennedy, Associate Professor of Business Administration, Harvard University, said while India had no economic impediments to achieving 8 per cent growth, it needed political clearance for reforms.

"There is no point waiting for consensus. It will require painful decisions and will be socially difficult," he said.

Jairam Ramesh, secretary, economics review committee of the Congress, said the country needed a crisis to grow.

With no external crisis on the horizon and a creeping internal crisis, growth was not possible, he said, adding that India lacked the governance capability to implement reforms and move on to a higher growth path.

The only speaker who was optimistic about India's chances was Ravi Shankar Prasad, Minister of State for Law, Justice, Company Affairs and Coal, who felt that major political parties understood the need for reforms and even state chief ministers had realised it was no longer possible to give away power to achieve political ends.

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