Issues in global economy won’t be resolved soon, says Montek

CHENNAI, MARCH 30:  

India can generate higher economic growth on its own steam despite the global economic slowdown, according to Montek Singh Ahluwalia, Deputy Chairman, Planning Commission.

“I am basically bullish on the medium term,” Singh said, addressing a meeting organised by the Southern India Chamber of Commerce and Industry on Friday.

He pointed out that for five years up to the global financial crisis of 2008, India’s economy had grown at over 9 per cent despite corruption, political issues, and bureaucracy, which are now being blamed for slow growth. These can be resolved in the long term and are ‘not a precondition to high growth,’ he said.

UNDUE DEBATE

There has been undue public debate on the slow 5 per cent growth, even if it was lower than expected. But India’s growth has to be seen in the light of China’s 7.5 per cent — earlier when India grew at 9 per cent, China had grown at 11 per cent and the gap has not widened — and Brazil’s and South Africa’s 2.5 per cent, Europe’s recession and no growth in Japan.

But “it would be a great mistake” to be complacent as the issues in the global economy are not going to be resolved soon, he said.

ACCELERATION MUST

The growth target for the ongoing 12th Plan is 8 per cent, the same as that of the last Plan that ended in 2011-12. India has to make up for the lost ground with the 5 per cent growth in 2012-13, the first year of the current plan.

Growth has to “accelerate over four years” starting next year when it should be over 9 per cent. India has to “offset global economic slowdown through domestic effort,” he said.

Investments will be key to get growth going. The Government is looking at reviving investments in infrastructure. Power availability and project clearances have been a major bottleneck. Regulatory clearances have been hit due to ‘well meaning activists’ and ‘procedural lacuna’ in projects.

The Government has set up a Cabinet Committee on Investments to take a holistic approach. The impact will be seen in the coming weeks, he said. The Committee will also address the coal price pooling issue to minimise cost impact. This will help tap the huge power generation capacities that are available. “High growth can come only from quality power,” he said.

Funds availability will also be addressed over the next two years. And with increasing confidence, inflows are bound to increase. India is among the few countries with a high growth and inflow will not be an issue, he said.

MANAGING THE FISC

On fiscal management, Ahluwalia said the Government has taken a bold step to eliminate under-pricing of diesel in the next year-and-a-half. Key primary inputs cannot be under-priced and political consensus is needed to eliminate distortion.

 Water efficiency will drive agriculture growth. The 12th Plan puts water and energy on the same plane. Energy is more of a pressing issue but with time water too will be a priority topic. Not enough has been done to increase people’s awareness on water-related issues and “tough decisions need to be taken,” Ahluwalia said.