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Ahluwalia moots strategy for 8% GDP growth

A five-point strategy to achieve 8 per cent GDP growth during the Tenth Plan period, leading to doubling of per capita income in ten years, has been suggested by Planning Commission member Montek Singh Ahluwalia.

"It is unfortunate that despite a decade of reforms, India is still one of the most protected economies in the world," Ahluwalia said. He was speaking at the PHDCCI Round Table on 'Planning for 8 per cent growth' in New Delhi.

He called upon the industry to prepare for globalisation. "We cannot achieve the desired growth rate unless the economy is fully opened up and the level of protection reduced," he said.

He also talked about Union Finance Minister Yashwant Sinha's blueprint for lowering import tariff to 20 per cent in the next three years.

Ahulwalia said that for 8 per cent growth - a 1.5 per cent increase from the current level -- an additional investment of 5.5 per cent to 6 per cent of the GDP will be required.

Assuming a decline in incremental ratio from 3.5 to 3 per cent and additional foreign investment of 1.5 per cent, an investment of 3 per cent would still have to come from domestic sources.

While household savings are at a satisfactory level, corporate savings need to be stepped up. However, the worst scenario performance has been that of public sector undertakings where savings have declined from 1 per cent to -1 per cent.

The major aim of the strategy is to effect radical reforms in the power sector where state electricity boards suffer 45 per cent to 50 per cent revenue loss on account of transmission and distribution, and theft, he said.

The medium and small sector which cannot afford to switch over to its own power generation are worst suffers.

Ahluwalia stressed on the need for financial reforms, particularly in the banking sector. The ratio of tax revenue to GDP has not grown to the desired extent. He suggested that the Parthasarthy Committee recommendations be implemented.

Pleading for free movement of goods, Ahluwalia suggested the enactment of a law to ban any restrictions imposed on inter-state and intra-state movement of goods by the state governments and scrapping the Essential Commodities Act.

Ahluwalia advocated elimination of non-merit subsides not targetted for the weaker sections.

Leading industrialists and experts at the meeting opined that there was a growing realisation that the acceleration of growth has to come not only from increased allocation for capital expenditure, but also from increased efficiency and productive use of existing resources.

This would mean elimination of wasteful expenditure.

A suggestion to improve efficiency and achieve faster growth is to focus on the planning process and emphasise speedy implementation of plan schemes. A more focussed approach and a vigorous but sustained drive for results, backed by incentives and disincentives to the staff, would show better results, they added.

They said that the states' participation in the second-generation reforms would be vital. The combined central and state fiscal deficit is more than 10 per cent of GDP. State finances are in a mess. Decentralisation and devolution of responsibility to the local levels would improve the allocation of resources and induce growth.

UNI

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