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How to Get 10% GDP Growth
July, 21st 2010

Projections by the International Monetary Fund label India one of the fastest-growing economies in the world. A meeting Tuesday of economic secretaries and industry leaders in New Delhi took the projection one step further: How can India reach 10% sustained growth by 2014?

According to two people who attended the high-level meeting, which was closed to press, the group laid out a 10-point plan to propel India to 10% gross domestic product growth, a figure it has never achieved despite its recent boom.

The first point, and the one the group continually referred back to, according to these people, was agricultural reform.

Sustained growth of 4% in the agricultural sector will be necessary to reach 10% overall growth, said one source, a manufacturing executive.

The group of secretarieswhich included Cabinet Secretary K.M. Chandrasekhar, Agriculture Secretary Prabeer Kumar Basu, Commerce Secretary Rahul Khullar, Finance Secretary Ashok Chawla, Revenue Secretary Sunil Mitra and Industrial Policy and Promotion Secretary R.P. Singhadvocated such reforms as increasing investment in agricultural technology, lowering the prices of water and power and teaching farmers sustainable land practices.

Growth in the agricultural sector is essential, Mr. Chandrasekhar, Indias top civil servant, told India Real Time after the meeting. We need to create demand in our rural economy. The rural economy carried us through the downturn.

Added Mr. Singh: We have to treat agriculture like an industry and go in there and make reforms.

Mr. Chandrasekhar said India should focus its agricultural reform in the eastern states. We are using all the groundwater in the northeast, in Punjab and Haryana. We need to look east, he said. We need to look at inclusive growth.

Another point discussed extensively was infrastructure development. Dr. Khullar said after the meeting that India consistently fails to carry through its infrastructure projects.

We can write beautiful plans, but we cant get the project done, he said. This is a major failing.

Dr. Khullar went on to say that foreign investors, currently a major source of Indian economic growth, will turn away from India in five years if they realize the infrastructure projects in which they invest are not reliable. Right now they are lured by the size of the market, he said. In the meanwhile, we must learn to do it right.

Mr. Chawla said about a trillion dollars are needed to adequately shore up infrastructure in India, said one person who attended. The finance secretary said more than half of that investment will come from the private sector and public-private partnerships, and the remainder will come from public debt financing, according to the source. A Finance Ministry spokesman confirmed the ratio, adding: The private sector has a very important role to play.

Mr. Mitra touched on tax reform during the meeting, saying a good tax system minimizes the cost of collection, increases compliance and minimizes distortion to the economy, according to the two people who heard him speak. Mr. Mitra said India will need to minimize exemptions and eliminate distorting effects in direct taxes as well as remove levies from indirect taxes.

It is in indirect taxes that the reforms are more significant, he said after the meeting, declining to elaborate.

The group also discussed manufacturing, the services industry, education, employable skill development, labor policy, government services, urbanization and banking, said both people who attended.

Why 10%? the group of secretaries was asked by reporters after the meeting.

We need growth of that level to take care of our people, said Mr. Chawla. We need it to reconcile the duality of two Indias: the India in Delhi and Mumbai, and the India everywhere in between.

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