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India's macroeconomic indicators strong: Jeffrey Sachs

Amit Prasad

Economists from all over the world at an Asian economic panel meeting at Harvard University recently expressed their confidence at the growing Indian economy and identified interesting prospects for the economy in the coming years.

Their academic insights validated Union Finance Minister Yashwant Sinha's upbeat assessment of 6 per cent growth.

Jeffrey Sachs, director of Centre for International Development at Harvard, said, "India appears to have been able to grow at a robust 6 per cent over the past decade and macroeconomic indicators continue to be strong. In fact economic growth could indeed be accelerated to 8-9 per cent. The only factor which could cause discomfort on the macroeconomic front is the burgeoning fiscal deficit."

Apart from a general overview of the Indian economy, Sachs identified two possible opportunities for India to tap into. One of them would be trying to obtain a large share of foreign direct investment likely to flow from Japan now.

Japan, as well as the US, is likely to be a 'saver' economy in the coming years. A current account surplus combined with a slowdown in spending is likely to result in the accumulation of abundant funds for external investments.

Therefore, Japan is likely to be searching for stable and high growth capital deficient countries with a reasonable level of IT infrastructure. In such a case, India could indeed be considered a favoured destination.

An argument forwarded by other economists present was that India actually lacked a decent level of development of IT. They were of the opinion that most of the IT boom in India was due to a surge in back-end work for US corporates which could not be directly associated with an acceptable level of IT infrastructure.

This kind of belief could be a factor in determining the actual levels of FDI actually received by India in the near future.

The second opportunity for India could arise from a greater integration with the East Asian economies.

"With one-sixth of the world's population and a high degree of technology dynamism and capacity, India should be an important economy in Asia within the next ten years. Asia is likely to benefit substantially by interacting more with India and within themselves in the near future," said Sachs.

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