As the Economic Survey rightly points out, 2006-07 represents another year of considerable achievement for India. Since 2003-04, real gross domestic product growth has averaged 8.6%, versus China’s 10.2%, and enough to see GDP per capita rise by more than 50%.
However, the job of developing the economy has only just begun.
It is important that the country maintains these kinds of growth rates, for not just a few years but for decades to come, while keeping inflation under check.
Half a century from now, economic historians will hopefully describe the recent period of rapid growth as the start of a golden era for India, rather than a glorious interlude during an otherwise undistinguished period.
The Economic Survey makes a number of useful suggestions how this might occur. Not surprisingly, infrastructure tops the list.
Despite progress in some areas, India’s physical infrastructure, in the form of roads, ports, airports, railways and power, all need considerable investment. And so does the quantity and quality of education.
According to World Bank projections, the population of India will grow exponentially over the next 25 years, surpassing China as the most populous country in the world before the middle of this century.
We require the kind of education that will equip us not just to survive, but to thrive in what is an increasingly competitive global marketplace.
Then, there is the financial infrastructure of the country to consider as well.
A more diverse set of financial instruments, including the development of the corporate bond market, is essential if the necessary funding for development is to be obtained.
Government estimates suggest that the physical infrastructure alone is likely to gobble up at least $350 billion (Rs15.4 lakh crore) over the next five years, around 40% of which must come from the private sector.
Following on from the Economic Survey, the Budget represents an important step in India’s economic progression.
While a tax windfall has given the government the opportunity to boost spending on its infrastructure, it is important that the extra investment is balanced by a tight control of current spending in order to limit short-term demand pressures.
If the government gets it right, inflation will subside and the country can look forward to a higher rate of sustainable growth. But if it gets it wrong, the authorities risk adding extra fuel to an economy showing signs of overheating.
(The writer is Group General Manager and Country Head, HSBC India)