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Government has capacity to deliver 10% GDP growth, says Cabinet Secretary
July, 21st 2010

The resilience of the Indian economy to the global financial crisis and the capacity of the Government to identify quick solutions and implement them will serve as the building blocks for achieving double digit GDP growth in the coming years. Stating this in his address at a session on 10% GDP Growth by 2014: Imperatives and Impediments organised by Confederation of Indian Industry (CII) in New Delhi today, Mr K M Chandrasekhar, Cabinet Secretary, Government of India, said the Government has overcome key stumbling blocks in recent years to reach a level where GDP growth for the current year is estimated at 8.5%.

He cited that the Government had to overcome high inflation caused by exogenous factors and the global economic meltdown while laying the foundation for sustained high growth. Among the various initiatives taken by the Government, he referred to the particular steps having been taken to save the current kharif output and maximise the rabi output to fortify the food supply and thereby stabilise food prices.

Mr Chandrasekhar said that sustained double digit GDP growth is largely contingent on the farm sector achieving sustained 4% GDP growth over the coming years. At the same time, he laid particular emphasis on creating and meeting the rural demand. During the economic slowdown when the exports markets had shrunk, it were the rural markets that industry had turned to for sustained growth, he pointed out.

Mr Chandrasekhar said the government price stablisation programmes have resulted in the domestic price levels becoming far more favourable compared with current global prices, and added that with normal monsoons forecast in the current year, the outlook would be far more optimistic.

He said the growth imperative will be guided by higher corporate investments, tax reforms, rationalisation of subsidies in different business sectors, holistic management of agriculture, efficient water management and particular focus on agriculture in the eastern states, effective targeting of PDS, deepening of the financial markets, and major focus on physical infrastructure development. All of these developments would be underpinned by the overriding goal of inclusive growth, he said.

Ms Sudha Pillai, Member Secretary, Planning Commission, Government of India, echoed the view that agriculture needs to go east. At the same time, she pointed out that the IIP in its current form does not reflect the totality of growth in the manufacturing sector. For instance, there are certain legacy issues to be tackled, such as units employing below a certain number of people not being taken into account in calculating the index.

Ms Pillai said that particular emphasis is called for on value addition of raw materials, instead of them being shipped out of the country liberally. She added that SME financing should also be given greater focus and a dedicated organisation for this would perhaps be necessary.

At a broader level, she said that for sustained high growth, there should be a careful fixation of accountability on those invested with the task of implementation of programmes and projects.

Mr Ashok Chawla, Finance Secretary, Government of India, in his address said that 10% GDP growth is an imperative for poverty alleviation. To achieve double-digit growth, he said that agriculture will have to grow at 4%, industry at 12% and services at 10.5%. Looking back, he said that over the period 2003-04 and 2007-08, agriculture grew by 4.9%, industry by 8% and services by 10.4%. So, with a little more effort from all key stakeholders, 10% GDP growth can be attained, he said, while adding that the key issue is that of sustaining the high growth over the longer run.

To get to 10% GDP growth, Mr Chawla said that investments should rise to 40% of GDP, for which savings rate will need to increase from 35% to 37-38%. The remaining 2-3% will come from external sources, he said.

Mr Chawla said that due initiatives are needed to tap the bulk of the household savings that are locked up in physical assets. These need to be converted into financial assets that can generate productive goods and services. Private corporate savings rate too needs to reach a higher level, he said.

Mr Chawla said that land locked up with public sector enterprises should be progressively utilised for productive purposes, and that a separate body could be created to facilitate this on the lines of the Divestment Commission.

Mr Sunil Mitra, Revenue Secretary, Government of India, said in his address that greater efficiency in public finance is critical for physical infrastructure development in the country. The challenge is to broaden the tax base, moderate the rates, and simplify the norms. Alongside, the cost of collection, compliance and distribution should come down.

Mr Mitra said that the Direct Tax Code (DTC) is a major step toward simplification of tax provisions. He said that over the years, direct tax reforms have resulted in direct tax rising from 2.9% of GDP in 2000 to 6.36% in 2009.

Goods & Services Tax (GST) is another important step, he said, while adding that it will enhance the competitive edge of manufacturing and service companies and create a common market across the country.

Dr Rahul Khullar, Commerce Secretary, Government of India, in his address said that the country needs a second wave of economic reforms to be able to achieve double digit GDP growth. Reforms would be needed in the land, labour, capital and product markets, he said.

As global industries re-engineer and relocate, Indian industry should be able to leverage the opportunities, he said, while adding that focus on health and education sectors would be critical to sustained high growth.

Dr Khullar said that the general lack of projectising the infrastructure project is a major lacuna in the country that needs to be addressed.

Mr R P Singh, Secretary, DIPP, Ministry of Commerce & Industry, Government of India, said that while on the one side employment levels have dipped in the manufacturing sector, on the other side, many manufacturing industries are faced with skill deficit. So, reskilling assumes key significance in the context of the overall growth needs, he said.

Mr Singh said that the manufacturing sector should create the capacity to absorb the surplus labour that agriculture has, but added that agriculture itself should be looked upon as an industry.

He said that the DIPP has put up discussion papers on FDI in retail and defence. FDI in defence sector will have a multiplier effect and contribute to 2-3% increase in manufacturing GDP.

Mr Prabeer Kumar Basu, Agriculture Secretary, Government of India, said that if agriculture has to grow at 4%, the focus would have to be on technology infusion, farm mechanisation, reforms and revision of various acts, as well as efficient water management.

He said that climate change will have a major bearing on the health of the sector and hence water management will be critical to the countrys long-term food security.

Earlier, Mr Hari Bhartia, President, CII, presented CIIs 10-point agenda for 10% GDP growth by 2014. The Agenda stands for (i) increase in agriculture productivity, (ii) 11-12% long-term growth in manufacturing sector; (iii) taking services sector to the next level; (iv) creating world class infrastructure; (v) significant improvement in primary and secondary level education; (vi) development of skills to improve employability; (vii) building consensus on labour policy to create employment; (viii) improving government delivery system; (ix) creation of new urban centres as growth poles; and (x) financing high growth with focus on financial inclusion.

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