PM: raising resources key to growth

PM: raising resources key to growth
The Financial Express, September 2, 2009, Page 1

fe Bureaus, New Delhi

India will end the current financial year with a GDP growth rate of 6.3%, despite a slowdown in the second and third quarters. However, the figure is lower than the 6.7% achieved in 2008-09. The Planning Commission estimate released on Tuesday comes a day after government data showed first-quarter GDP growth at 6.1%.

The meeting of the commission, chaired by Prime Minister Manmohan Singh, said restoring the growth momentum would require filling a resource gap of Rs 1.6 lakh crore to finance public investment until 2012, the terminal year of the 11th Five-Year Plan. Without mentioning disinvestment in public enterprises, Singh said the plan panel has established the challenge of resource mobilisation. “We will have to give careful thought to the various suggestions made for raising additional resources,” he said.

Planning Commission deputy chairman Montek Singh Ahluwalia was more explicit: “A bold and clear disinvestment programme is needed to meet some of these gaps in 2010-11 and 2011-12.” The plan panel noted that robust growth in investment would depend “critically on (the government’s) ability to create a conducive atmosphere for private corporate investment”. This includes pushing for private-public partnership in infrastructure sectors, it noted. Public sector power firm NHPC listed on the exchanges on Tuesday at a 2% premium while Oil India’s IPO will open on September 7.

The plan panel’s figures and analysis not only reflects the UPA administration’s position on how to manage the economy, but will also guide its current term in office. It has projected average growth for the five-year period between April 2007 and March 2012 at 7.8 %, lower than its earlier projection of 9 %.

The estimates rolled out in the paper show overall growth will be supported by a recovery in industrial growth to 7.8% from the 4.1% recorded in 2008-09 as a result of the global economic slowdown. But growth in the services sector is expected to be at 8.2%, down 150 basis points from last year.

Agriculture and allied sectors will contract by 2.5%. The Prime Minister said he anticipated a shortfall in overall foodgrain production at between 18 and 29 million tonne.

This will drive inflation beyond 5%, as measured by the wholesale price index. “The situation could turn worse if agricultural outcomes turn out to be worse than projected,” the commission warned. The worst-case scenario painted by the panel says farm output could decline 6% in the current fiscal, weighing down overall economic growth to 5.5%. But Singh said India was in a strong position to manage the consequences.