Poor infrastructure, lack of skilled workers could slow growth: PM

Poor infrastructure, lack of skilled workers could slow growth: PM

India’s economic growth is constrained by the lack of skilled manpower and inadequate infrastructure, Prime Minister Manmohan Singh said on Wednesday.

The South Asian nation,targeting 10% growth by the end of the 11th Plan, expects to sustain the growth momentum in the medium term, he said at the opening of a summit on telecommunications.

India’s $906 billion (Rs35.7 trillion) economy has grown at more than 9% since April 2005, making it the second fastest after China among the world’s top 15 economies. The government wants to boost growth to increase jobs and eradicate poverty in a country where half the 1.1 billion population live on less than $2 a day, according to the World Bank.

Singh said a ministerial panel would soon decide on the issue of availability of spectrum, or radio frequencies, that can be used by cellphone operators to carry calls.

“I have asked the group of ministers tasked with this to expeditiously conclude deliberations and?suggest?a?road map regarding availability and timing," he said.

The Prime Minister said spectrum availability could be a constraint to the growth of telecommunications in India, the world’s fastest growing major mobile phone market.

The country needs to double spending on roads, ports and other infrastructure by 2012 or risk derailing its record economic growth, Montek Singh Ahluwalia, a key policy adviser to the government, had said last week.

In the past year, India has tripled its investment target for infrastructure to $500 billion, or 9% of gross domestic product (GDP), to strengthen stretched public works.

Even that estimate is conservative, says the Asian Development Bank (ADB). The country needs as much as $1.6 trillion for infrastructure in the next 10 years, or about 10.5-12% of its GDP, to maintain the current growth, Rajat Nag, managing director general of ADB, had said on 4 December.

India’s electricity shortage reached an eight-year high last year. Highways, which move almost 80% of the goods transported in India, account for only about 2% of the country’s roads. It takes an average 85 hours to unload and reload a ship at India’s major ports, 10 times longer than in Hong Kong or Singapore, according to government figures.

Mitsui & Co., Ltd, Japan’s second largest trading company, had said last month it has been discouraged from investing in India because of the country’s poor roads, ports and power situation.

India’s unprecedented 9% growth has exposed its antiquated transport and power networks, which are “highly unproductive by world standards," according to the Organisation for Economic Co-operation and Development.

Prime Minister Singh wants to copy the success of neighbouring China, which invests about $150 billion on public works each year, three times the amount spent by India. That has helped China attract an average $60 billion of foreign direct investment each year since 2004, more than four times the flows into India, creating more jobs and spurring growth. China’s economy expanded 11.5% last quarter.

Lehman Brothers Asia Ltd and other investment banking firms say India must also allow expansion of pension and insurance businesses, which can invest in long gestation projects, to mobilize the savings of the nation’s 1.1 billion people.

About 80% of India’s population has no insurance cover and 88% of the workforce doesn’t contribute to pension plans, Lehman estimates. The pension business is not open to foreign investors and there is a 26% limit on overseas investment in local insurance companies.

Companies such as Citigroup Inc., General Electric Co. and Google, Inc. are looking to India for engineers, accountants and programmers, although there is a finite pool of talent they can choose from.

While the number of Indian millionaires rose by 20.5% in 2006, the fastest pace after Singapore’s 21.2% gain, according to the 27 June World Wealth Report, about 40% of adults in India are illiterate. Only 10% of Indians in the 18-24 age group are enrolled in higher education, compared with 45% in developed countries.