Reforms must to spur growth, says CII

Referring to the revised estimates of GDP and other growth figures released by the Central Statistical Organisation on May 31, Confederation of Indian Industry President R Seshasayee said these were clear pointers to the fact that the economy needed a set of structural reforms to create inclusive growth apart from just improving its performance.

In a statement, he welcomed the last quarter's GDP growth of 9.3 per cent saying that the CII had long been emphasising the need for double digit GDP growth.

Acknowledging the revival of the agricultural sector in the last quarter of 2005-06 owing to a normal monsoon, Seshasayee said this should translate into better prospects for industry and services in the current year, considering the lag which occurs when growth is translated into demand.

Saying he was disappointed at the 9.0 per cent growth in manufacturing as against advance estimates of 9.4 per cent, Seshasayee said the situation became worse when looked at in the context of a general slack in industrial growth, where mining had grown at only 0.9 per cent as against 5.8 per cent in the previous year.

The CII believed that double-digit GDP growth was only possible if industry (including manufacturing, mining and construction, electricity, gas and water supply) achieved a growth of 12 per cent and more, its president said.

It was imperative that we look at growth keeping in mind the fact that it must be inclusive, sustainable and be supported by innovation, he added.

Industry, which grew by an average of less than 6 per cent during 1991-2001 and started growing in excess of 7 per cent during 2002-05, could have clocked a higher growth rate but for the five sectors "" power, rubber, plastic and refining; mining and agro and food products, managing less than 5 per cent growth for the last three years.

The drag had been created particularly by electricity, gas and water supply (5.3 per cent), and mining and quarrying (0.9 per cent).

Taking note of this slack, Seshasayee shared the CII's suggestions for these two areas where structural reforms were required. For deregulating the energy sector there was a need to create an energy commission for developing and implementing an integrated energy policy covering power, coal, oil and natural gas, non-conventional and nuclear energies.

Then, the creation of a competitive and vibrant wholesale power market by implementing multiple measures spanning the entire electricity value chain, increasing the role of the Centre through stronger incentives for states to hasten reform, and increasing the Central Electricity Regulatory Commission's mandate over state regulatory bodies were a must.

Commenting on the power crisis afflicting most parts of the country, Seshasayee said there was a need to resolve this in a sustainable manner by focusing on generation, transmission, distribution and by placing special emphasis on deregulation of the coal sector.