core sector communique

Spurring GDP growth to optimum level

The Finance Minister, Mr Pranab Mukherjee, was hoping, as late as on February 7, for a 6.9 per cent GDP growth for India in 2011-2012, but the World Bank sees only a flat GDP growth rate of 6.8 per cent to prevail till the end of 2012-13.The Government has been putting a brave face on it, claiming even the lowered estimate to be impressive, when compared with the Bank's forecast of 2.5 per cent for the global economic growth rate for calendar year 2012. Such self-delusion can cost very dearly.

There can be no comparison of India's growth rate with that of affluent countries, which have occupied a far higher economic pedestal over the years. They also do not confront exploding populations and are not crippled by age-old afflictions of poverty, hunger and malnutrition, lack of educational and healthcare facilities and chronic unemployment.

The challenges India faces are sui generis. It is imperative for India to stay ahead of them and not allow them to reach the flash point. For achieving such an objective, it needs to aim at a sustained double-digit growth of at least 12-15 per cent.Is this a realistic mission, given the base line of less than half of the required target? Sure, it is, provided all the economic players, the Government, the Planning Commission, the public and private sectors, banks and financial institutions, and the federations of chambers of commerce and industry, conjointly decide on the right things to focus on and get them done according to a time-bound action plan.

COLOSSAL DRAIN

At the moment, all of them are on ego-trips and binges of one-upmanship of their own, without extracting the maximum synergy from their collective effort. To my mind, there are three directions in which, if only all the actors pull together, the GDP growth can attain double-digit and stay there.

The first is timely implementation of already sanctioned projects so that the intended benefits accrue to the economy without the usual colossal drain of resources in time and cost over-runs. The Ministry of Statistics and Programme Implementation has a vital role to play in addressing this, but, unfortunately, it gets only political non-entities as Ministers, being regarded as some kind of inconsequential backwater. An effective Minister who is also a political heavyweight should be put in charge of it with the clear mandate of ensuring the commissioning of the ongoing projects within the stipulated period.It is not enough to commission projects or create productive assets in time. Their maintenance is of the greatest importance in order to ensure uninterrupted operation and availability. But this is where India's work culture has been at its worst.

DRAMATIC INCREASE

It has been calculated that efficient project implementation and proper maintenance alone can boost the GDP in India by an additional 3 per cent.

A third trigger of growth that has recently come to the fore is Internet, Broadband and mobile telephony, and generally the spread of information and communication technologies. Several studies undertaken in the past by the likes of the World Bank, McKinsey and Booz, and the latest by the Indian Council for Research on International Economic Relations (ICRIER) released on January 19, are all agreed about the GDP registering a dramatic 1.5 to 1.8 per cent increase for every 10 per cent increase in the number of Internet subscribers, and broadband and mobile penetration.

They also show that the developed States (with higher per capita income and level of Internet penetration) can grow at 2.36 per cent for every 10 per cent increase in the number of Internet subscribers. Put differently, if Bihar had half as many Internet subscribers as Punjab, it would result in an increased growth of 7.02 per cent in state per capita income.The Government can jack up the GDP by another 3 per cent by taking the optical fibre network to the panchayat level and raising the number of broadband users to 175 million by 2014 as envisaged.

Thus, a straight jump of up to 6 per cent in GDP is there for keeps, taking it to the desired level of 15 per cent. All it takes is for the Government to summon the will.

- Umesh Shanmugam