New Delhi: Panellists representing the private sector, multilateral institutions and the Indian government were all upbeat about the country’s growth prospects, though there were differences on policy approaches.
Montek Singh Ahluwalia, deputy chairman, Planning Commission, identified inadequate infrastructure as the most important constraint to growth and said the broad approach is to focus?on?the?supply side of the economy to keep growth around a 9% target.
The Indian economy grew at an average of 8.8% between fiscal 2004 and fiscal 2008. In fiscal 2009, in the wake of the financial crisis, growth slowed to 6.7%.
Narrowing it: Planning Commission deputy chairman Montek Singh Ahluwalia at the summit. He said inadequate infrastructure was the most important constraint to growth. Rajkumar / Mint
In the current fiscal, Prime Minister Manmohan Singh expects the economy to grow at around 6.5%.
Other panellists, including Kalpana Morparia, chief executive officer of JPMorgan India; Raghuram Rajan, professor at University of Chicago; Shumeet Banerji, CEO, Booz and Co.; Lars H. Thunell, executive vice-president and CEO of International Finance Corp.; and Rajat Nag, economist at Asian Development Bank, were generally optimistic about India’s long-term prospects.
They were debating the country’s economic outlook at the World Economic Forum’s India Economic Summit in New Delhi on Sunday.
Rajan and Morparia, however, did not think financial sector policies were ideal. Morparia felt the policy approach to bring about financial inclusion lacked imagination.
Around 40% of the current bank branch network is in rural India and covers just 6% of the villages.
In this context, Rajan felt the policies over the last 40 years had not worked well. It is time to take more risks in the financial sector as the pay-offs are big, he added.
Banerji pointed to India’s problems with execution and slow pace of progress. “There’s enormous stickiness about getting things done,” he said. Despite problems with execution, Banerji said the underlying growth dynamic is so compelling; it tends to offset ground-level problems as seen by potential overseas businessmen.
The growth dynamic and its implications were placed in the larger historical context by Rajan.
“We are at a distinct point in the history of economic growth,” Rajan said, explaining the gradual movement of economic activity away from Western nations towards Asia.
India is well placed to tap this historical movement.
Thunell felt the way business operations have evolved in India recently could help it tap a large market at the bottom of the pyramid, which he described as one of four billion people living on less than $3,000 (around Rs1.4 lakh) a year, valued at $5 trillion.
The government has identified the weak state of education in India as one the constraints which could impede the country from tapping opportunities which are coming its way on account of the convergence of many factors.
According to Ahluwalia, health and education are important elements in need of attention to ensure equality of opportunity.