Economic growth seen at 6.3%

The economy is expected to grow 6.3 per cent in the current fiscal, says the India International Centre's mid-year review of the economy.

Agricultural production is expected to fall by 1 per cent. Of the 8.4 per cent growth seen in the non-agricultural sector, industry is expected to grow at 7.6 per cent and services at 8.8 per cent.

There is a fast growing and more stable trajectory of growth for the non-agricultural sector, quite separate from agriculture, says the review.

"Undoubtedly, there are linkages, but at best they are numerically not that significant," it says.

The review adds the segment of agriculture that makes up the significant share of the rural market for manufactures and other modern services ""the richer farm belts of northwestern India and some southern regions "" are relatively insulated from the impact of the monsoons.

To increase the economic growth rate from the baseline figure of 6 per cent to about 7 per cent, agriculture will have to continue to grow at 2 per cent annually on an average basis and the non-agricultural sector will have to accelerate to 8.5 per cent.

Given the current level of investment optimism, this growth can be maintained with some policy changes and easing of infrastructural bottlenecks, it adds.

If the growth rate has to be raised to 7.5 per cent on a sustained basis, and unless agricultural growth rises to above 4 per cent, non-agricultural output expansion will have to be of the order of over 9 per cent.

This will, however, require significant changes in policy to make electricity generation attractive, reduce regulatory clutter in the organised sector, improve the efficiency of public expenditure and the channels by which enterprises have access to credit and capital markets.

"The principal constraint to higher levels of investment in this economy, at least in the present context, are the burdens of bad regulation "" both in the sphere of legislation and often more so in the sphere of administration," it adds.

"It still remains to be seen as to how many of the United Progressive Alliance (UPA) government's intentions on economic reform actually become operational and how many fail to make it out of the consultative process between the UPA allies," the review says.