'8% GDP growth possible'

India can achieve 8 per cent sustained gross domestic product (GDP) growth over the next five years if per capita income of the country doubles, said NK Singh, former member of Planning Commission and secretary to the Prime Minister's main economic advisor.

Singh was speaking at Stanford Asia Technology Initiative's (ATI) Global Entrepreneurship Conference on "The Rise of the Indian Multinational: Global Business Trends".

Highlighting challenges facing the economy, Singh pointed out four major issues: unfavourable demographic differential, inadequate education levels, macro management and low labour, capital and financial productivity.

According to Singh, massive workforce which is expected to swell from the current 690 million to about 950 million by 2010 needs to be absorbed. However, as the country does not provide enough employment opportunities, he recommended greater capital investment in services, agro processing, transport, construction and other high growth areas.

Further, he called for harmonisation of employment opportunities with technical skills considering that only 35 per cent of the labour force is educated up to the primary level. He linked this to high number of dropouts and unfavourable teacher-student ratio.

Singh pointed out Indian enterprises were paying anything between 150 to 175 basis points more than the international average on monetary capital as a result of inefficient financial intermediation alone.

He stressed on efforts to improve tax and revenue reforms and state finances besides managing fiscal deficit. Power reforms spelt out in the Electricity Bill 2003 would help reduce overall power tariff by 40 per cent for industries and make electricity more affordable to the rural sector, he added.

He recommended an open sky policy in civil aviation and a reduction in government's revenue share in the telecom sector from 12-13 per cent to 4-5 per cent so as to reduce the cost of communication.

To overcome the challenges, he said that it would be imperative to have a greater degree of understanding between political parties of different ideologies.

Speaking at the conference, Rafiq Dossani, senior research scholar, Stanford Asia-Pacific Research Centre, pointed out that though the number of man hours spent on outsourced software development was greater than in the US, value retention was only 20 per cent.

In the US, the value added was about 80 per cent despite the miniscule amount of man hours spent. To counter this, he suggested providing greater technical and designing skills especially in services that do not require contact with end users.