'Core services distribution key to growth'

The World Bank's development policy review (DPR) said the primary challenge for India is not to raise growth from 8 per cent to 10 per cent, but to sustain growth while spreading its benefits.

The DPR 2006 pointed out that India's growing economy should ensure that all citizens get the benefits of core public services such as healthcare, education, power and water supply. It stresses that public money should be spent on institutional reform in the public sector.

"Economic reforms should involve spending on citizens below the poverty line. The government should also look at the effectiveness of public spending for core public services," said Michael Carter, World Bank's country director for India.

While the service sector is booming, agricultural productivity is declining, constraining rural economic growth. Average agriculture growth has decelerated from 3.2 per cent in 1980-92, to 2.4 per cent in 1992-2003. This is far below the government's target of 4 per cent a year set in the Tenth Plan.

Lant Pritchett, economist at the social development unit for South Asia, said, "Raising agricultural productivity will help India continue its trajectory of rapid growth."

But subsidy in the agricultural sector has affected higher productivity."

The government should shift its role from commanding and controlling to being a catalyst and facilitator in agricultural marketing, land policy and administration.

The World Bank recommended redesigning labour regulations to attract more investments and create job opportunities as for every worker employed in the organised private sector there are four in the agriculture sector.

China's market share in exports of manufactured goods was twice India's in 1980. This gap has now jumped to eight times and is rapidly widening. While, China's freight container traffic is 18 times greater than India's, its airfreight is 12 times the volume.

The report said the government should increase public-private-partnerships. Its advantage is that they force an open decision about delegation and also force clear unbundling in separating the roles of provider and regulator.