The planning commission recently approved the 10th five year plan which projects an eight per cent gross domestic product growth rate. But the performance of the economy in the first year of the plan is itself reason enough not to get carried away by such optimistic figures. The Reserve Bank of India’s mid-year review pegs GDP growth at not more than five per cent, scaled down from the earlier 6.5 per cent. Going by the current health of the economy, the actual rates of growth could be lower still. Industrial performance has been sluggish and the agricultural sector’s performance was affected by the poor monsoons.
But the failure to meet targeted growth rates is not unusual in the history of five-year plans in India. Only in the late Eighties and the Nineties could India boast of impressive performances, possibly due to structural reforms and an overall improvement of the economy, together with adequate monsoons.
Today, our growth rates are closely linked with the world economy now that our economy has been opened up to foreign technology and investments. And it is the flow of foreign technology and investments that will largely determine domestic growth and our performance in global trade. However, strategic sectors like power and infrastructure (particularly roads and ports) have not been able to attract much foreign investment because of the lack of clear government policies. Instead, investors have tended to concentrate on the vast market for consumer durables. But the domestic market for white goods has largely been milked for all its worth in the last decade.
What is needed now are heavy investments in basic infrastructure to facilitate smoother and speedier communication. This holds true for both urban and rural areas, which have seen enormous growth. There is the ambitious Pradhan Mantri Gram Sadak Yojana worth Rs 60,000 crore, but it is yet to take off. But such a massive road development programme, which has the potential to create job opportunities for thousands, needs the active involvement of the private sector.
It is also time to give a boost to the power sector with more realistic policies to encourage the private sector to fill the gaps left by the public sector.
Take the example of China. It was quick to realize that developing its communication network was crucial if it wanted to earn a place in the global industrial map. Thus every possible encouragement was given to these areas. As a result, China has achieved remarkable domestic growth and has been attracting a vast amount of foreign investment.
Thus any country which accords low priority to the vital infrastructure sector is postponing its growth possibilities. The white goods market is important and its development is related to the infrastructure of the country. But priorities have to be set correctly.
Sense of priority
For example, India has encouraged mass production of automobiles although our network of roads needs to be widened and extended. China, on the other hand, minimized production of the same (at the time its population mostly travelled by bicycles and buses), until it had developed its road network properly.
The agricultural sector, and especially the glut of foodgrains in godowns across the country, too requires our attention. However, mismanagement and policy lacunae have resulted in most of it going to waste even as scores die of starvation.
This problem as well as that of developing a road network in the country complement each other. A programme could be devised whereby rural road projects can engage the rural unemployed and offer them rationed food stocks in lieu of money, thereby relieving the Centre of monetary burden.
Achieving an eight per cent growth rate is not impossible — our country has the potential to register an even higher growth rate. But this would require the adoption of dynamic policies, and more important, to ensure their speedy implementation.