Riding the wave of growth fundamentals such as demographic transition, improved incentive structures, diffusion of new technologies and an improved security environment, India will be growing at the rate of above 10 per cent per annum, Finance Ministry Advisor Vijay L Kelkar said in Sydney.
Observing that India is at the threshold of a golden age of growth, he said India's democratic framework is a key growth fundamental.
"India has paid the 'fixed costs' of democracy in terms of the creation of institutional infrastructure, traditions and conventions.
"Further, India's democratic system has also internalised (what Prime Minister Atal Bihari Vajpayee calls 'coalition dharma'), showing that coalitions can provide stable government and push economic reforms," he said, while delivering the 2004 K R Naryanan lecture at the Australian National University in Canberra on Tuesday night.
"India -- riding the wave of growth fundamentals such as demographic transition, human capital accumulation, improved incentives structures, diffusion of new technologies such as information technology, total factor productivity accelerators through 'network industries', and an improved security environment -- will be growing at growth rates which can be above 10 per cent per annum i.e. double digit growth rates."
Referring to the growth as "India: On the growth turnpike", Dr Kelkar expressed confidence that the economic growth in India will considerably accelerate further in the coming decade.
Explaining that the term 'turnpike' is typically North American, referring to an expressway, Kelkar said, "India's high GDP growth is sharply visible when GDP comparisons are done on a purchasing power parity basis."
He said it is likely that by 2004, India will reach the third place, displacing Japan, giving the country a global ranking behind United States and China.
Observing that a remarkable feature of India's growth experience is its resilience to shocks and globalisation, he said India is widely seen as having an extremely strong position on the external sector which has been achieved through several elements like currency depreciation, export buoyancy, and policies of avoiding foreign currency debt.
"Our foreign currency reserves are now roughly as big as our external debt, so there can be little no question of a balance of payment crisis shaping up," he said.
He said unlike many other countries, in India, the introduction of market-oriented reforms has been highly popular with the larger populace.
Moreover, the country is "trying to focus on incentives, and give the right people the right incentives to do the right things."
"We are trying to reduce frictions and transactions costs, so as to enable more transactions and more trading. We are trying to harness network externalities and obtain increasing returns to scale," he added.
The government is also trying to emphasise on 'meso-economic reforms', to put a focus between the macro and the micro, which consists of major institutions and "rules of the game."
Expressing the two areas of concern, Dr Kelkar highlighted "the problem of successful resolution of fiscal consolidation issues, and the second is that of regional disparities."
"A successful implementation of this transformation of the tax system, and an elimination of the revenue deficit by 2007-08, is perhaps the most important single issue in public policy in India today," he observed, expressing confidence that tax reforms currently underway will enable the economy to meet the objective of fiscal consolidation, which will in turn enable the economy to achieve other important social goals.
Despite the two problems, he said there are other forces -- flexibility of the labour market; impact of new infrastructure on 'equalising differences; fiscal transfers; policy innovations -- having an uplifting effect.
He said the GDP growth in India over 2004-2024 will be much higher than that seen over 1980-2004 and "India, compared to Japan, China and other high growth economies of Asia, will have the advantage of an access to productivity enhancing IT, which was not available in earlier decades. This way, we will be cashing in on the "late comer's advantage."
