The lack of will among banks to lend is constraining Indian economic growth by at least one to two per cent, said former finance minister P Chidambaram.
"The reforms seem to be running out of steam. There is little hope of revival and present indication are that Indian economy may be once again seeking struck in a low-growth trap," said Chidambaram.
He was speaking at the Purshotamdas Thakurdas Memorial lecture held in the city today.
He pointed out that there had been a secular decline in the GDP growth from 6.6 per cent in 19998-99 to 6.4 per cent in 1999-2000 and 5.2 per cent in 2000-01.
The downturn is expected to continue this year and the latest International Monetary Fund forecast has put India's GDP growth at 4.5 per cent.
Chidambaram also said that there is a jobless growth notwithstanding the decline in fertility rates. Around 8.7 million people enter the job market in India every year.
Therefore, the growth rate must expand employment opportunities and absorb nearly all the young men and women who seek employment, he said. He added over 300 million people live in abject poverty.
"Since March 1998, however, we have a reasonable degree of political stability but this is not reflected in our economic performance. The slowdown in the industry over the last four years has curbed expansion of employment and in the case of the private sector jobs over the last four years have been minimal."
The growth of employment in the organised sector reached a peak of 1.5 per cent in 1996 but has plunged to 0.04 per cent by 1999.
"By now the growth rate would most likely be in the negative territory. Assuming that the growth rate of population over the next 10 years will be 1.6 per cent and the decline in poverty will be of the same order as in the 1990s, there will still be 200 million living in abject poverty ten years hence," said Chidambaram.
He also added that the quality of growth has been uninspiring and the falling growth rate is now accompanied by rising unemployment and stagnation in the number of people living below the poverty line.
