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'Bureaucratic, other reforms needed for 10% growth'

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Press Trust of India New Delhi

The return of economic normalcy may assure 9 per cent growth, but a couple of reform, including bureaucratic, is required to achieve a sustainable 10 per cent expansion, says Chief Economic Advisor Kaushik Basu.

"To hold on to 9 per cent (economic growth), there are a couple of things -- get back to business as usual, push up savings, etc. (For) 10 per cent sustainable (growth), you do need a couple of measures but these are not asking for the skies," Basu told PTI.

He further said India can surpass China as its growth story is more sustainable since it is coming from all sources, unlike in the neighbouring country where it is being orchestrated by the government, which is a matter of concern.

 

From 9 per cent economic growth to a sustainable 10 per cent, it is a big step, he said, adding for the economy to take that jump, India needs to reform its bureaucracy, food distribution mechanism and agriculture, among others.
    
"Bureaucratic reforms. You do want a more efficient decision-making system in government. If you can manage to work on that alone, 10 per cent (economic growth) is achievable," Basu said.
    
India has a cumbersome decision making system when it comes to enterprise and business, he said, adding it takes too long to give the green signal to an enterprise to flourish, for a firm to close down and a contract to be enforced.
    
"All these, we have data, compared to the countries which are booming and doing well, India does very poorly," he said.
    
"This is a question of strict decision. Government has to take a decision that we cut these red tapes. If we do that I think we are going to step into 10 per cent growth because all the other factors are very well poised for that," he said.
    
On how difficult these bureaucratic reforms could be, Basu said, "at one level very easy, at another level very hard" as the government will need a lot of determination to replace 50-year old structures, even if it has outgrown their utility.
    
However, he cited on-going reforms in the indirect taxes, Finance Minister Pranab Mukherjee's repeated assurance of improvement in governance and better food distribution system expected due to the Food Security Act as good signs.
    
Basu expects sustainable 10 per cent growth may come only by 2014-15. "I think within the next four years into double digit... By FY'15," the advisor said.
    
Apart from the bureaucratic reforms, there is a need for rural investment to improve farm productivity. India has woken up to the importance of infrastructural investment in urban areas. Now the push should be in rural areas, the CEA said.
    
"There has been talk of this (rural infrastructure) but pressure has to be kept up basically on rural irrigation more than anything else," he said.

Agriculture contributes 14.6 per cent to India's national income and close to 60 per cent of the labour is in farming, Basu said. "It's a very lopsided ratio, so we don't want more people, what we need is greater productivity," he added.
    
In fact, what the country needs is expansion in labour intensive manufacturing sector that can absorb huge amount of labour right now sitting with agriculture, the CEA said.
    
On the possibility of India growing faster than China, Basu said, "It is entirely possible for India to cross China's rate of growth... Vis-a-vis China, one great advantage of India is China's growth is very state-centric."
    
India's growth is coming from different sources -- from big corporations to small entrepreneurs, to farmers, he said adding innovation is taking all over the place.
    
Though calling the Chinese government "an extremely intelligent government" that has steered the economy, Basu expressed concern over the possibility of failure.
    
"It always worries me, if the government begins to falter, since so much is in the hands of the government, economy begins to falter... Leads me to believe that India's growth is actually in some ways a more sustainable growth than China's," the Chief Economic Advisor said.
    
India's growth slowed down to 6.7 per cent in 2008-09 due to the effect of global financial meltdown. However, stimulus measures by the government has pushed it up to an estimated 7.2 per cent during 2009-10.
    
The government expects to return to nine per cent growth during 2011-12 only and has projected economic expansion this fiscal at 8.5 per cent.

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First Published: May 23 2010 | 2:03 PM IST

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