WEDNESDAY, JULY 24, 2002
THE TIMES OF INDIA
ALL THAT MATTERS
POWERED BY
INDIATIMES

Search in The Times of IndiaWeb Indian Sites    Advanced search
 Indiatimes >  The Times of India > All That Matters > Article
 Home
 CLASSIFIEDS
 Matrimonial
 Jobs
 Real Estate
 Automobiles
 Post Print Ads
 All Classifieds
 NEWS
 India
 World
 Cities
 Sports
 Entertainment
 India Business
 Intl Business
 Infotech
 Health/Science
 Photo Gallery
 Weather
 TOI Headlines
 Top Media Headlines
 OPINION
 Editorial
 Interview
 Letters to Editor
 NRI SERVICES
 India on Mobile
 Remit2India
 SUPPLEMENTS
 Education Times
 Financial Times
 SUNDAY SPECIALS
 All That Matters 
 Life & Style
 Men & Women
 Mind Over Matter
 Special Report
 Crossword
 PRINT EDITION
 Delhi Edition
 DAILY DOSE
 Horoscope
 Jokes
  Channels
 Shop
 Auctions
 Bill Pay
 Books, Music & Movies
 Classifieds
 Janampatri
 Music Download
 Net Carrots
 Remit2India
 Shopping
 Times Multimedia
 Travel Bookings

 Communicate
 Chat
 Clubs
 Dating
 Egreetings
 Email
 Invites
 Message Boards
 Messenger
 SMS 8888
 Valufon

 News & Finance
 Broking
 Maharashtra Times
 Medianet
 Navbharat Times
 Photo Gallery
 The Economic Times
 Times of Money
 Fun
 Contests
 Entertainment
 Games
 Jokes
 Movies (Filmfare)
 Music
 TV Guide
 TweenTimes

 Explore
 Astrology
 Auto
 Brandquiver
 Cricket
 Cuisine
 Festival
 Fitness & Health
 Infotech
 Learning
 ModelWatch
 Pets
 People
 Search
 Seminars
 Spirituality
 Travel
 Weather
 Web Directory
 Women (Femina)

 City Guide
 Maps
 Times City
 Yellow Pages

II

 [ SUNDAY, JULY 21, 2002  12:54:54 AM ]
In an economy where the GDP has been growing at 5-6 per cent, itís difficult to believe that growth can be pushed up to eight per cent during the next five years. Prospects of drought have made people more sceptical.

Achieving the ambitious target of eight per cent depends both on an increase in investment and on more efficiency. While these may be technically feasible, they are unrealistic for the Indian economy.

A government that is quick to roll back even the smallest unpopular measure at the slightest opposition, can hardly be expected to take on the long list of tough decisions that are needed.

Looking at the scenario built by the Planning Commission, we see that the share of GDP invested should rise to 33 per cent. This has to be financed to some extent by foreign capital but largely by domestic savings.

For the last three years, household savings have been increasingly financing government consumption rather than going into productive investment. This can be easily corrected by raising taxes and cutting expenditure.

But these affect voters and interest groups. As a result, steps such as reducing public sector employment, cutting subsidies and raising user charges, will face political opposition.

Equally difficult will be the policy changes needed to increase productivity. For achieving a growth of eight per cent, industry has to grow by 10 per cent. In the last 10 years, this sector has grown at about seven per cent.

As the role of the public sector gets reduced, the onus of growth falls on the private sector. Creation of an industrial policy environment that will push up private sector investment and lead to improvements in growth is not simple. There are deeply-entrenched vested interests that would oppose such moves.

For instance, a recent ordinance aims to improve the system by which banks and other financial institutions can recover their money from defaulters. But there is huge pressure by industrial lobbies on the government to change it.

Loans to the order of a mind-boggling Rs 1.5 lakh crore are owed to lenders. Some of them, such as the IDBI, have been pushed to the verge of bankruptcy because of these defaults.

When the government saves them by doling out tax-payers money, it effectively channels public money to corrupt industrialists. But since those who gain from the current system are those who fund elections and contribute to parties, the pressure on the government to weaken the ordinance might well work.

Another policy that has restricted growth has been the reservation for small-scale industry. There is little rationale for this after allowing foreign companies to compete with the SSI units. Other than pandering to some petty industrialists, there is no reason why this policy should be continued.

Thus, the question is not whether the target of eight per cent growth is feasible, but whether itís realistic to think that the BJP has the strength to resist pressure from the support base of its voters and financiers.

And this, unfortunately, is why it may not be achieved.

(Ila Patnaik, Senior Fellow, Indian Council for Research on International Economic Relations)

 COMMENTS ON THIS ARTICLE
No comment has been posted for this article yet.
ALL THAT MATTERS HEADLINES
Can the Indian economy grow at eight per cent?
II
Whose Devdas is it?
Court proceedings, Cupid and sleeping lawyers
Ignorance ainít bliss
II
Can Devdas be a hero for todayís youth?
Nasty Rant, post 9/11
Guiding your karma
The tragedy of an IVF muddle
Itís akin to musical chairs
Cabinet reshuffle: Will it make a difference?
Sukh dukh ki baat
Emergencies and litigation fever
Give us funds and weíll make a Harry Potter here
Now is not the time for Vajpayee to falter
Should homosexuality be legalised?
II
Asia comes to the US
Enter the lists
");
");
");
           TOP
About the Publisher | For reprint rights: Times Syndication Services
Copyright © 2002 Times Internet Limited. All rights reserved.  |  Terms of Use  |  Feedback  |  Sitemap
Ila Patnaik