Friday, June 6, 2008

8.6% GDP growth for 2008-09

by Jo Black

CII has projected an 8.3% to 8.6% GDP growth for 2008-09. Mr K V Kamath said this while addressing a Press Conference.

Despite global slowdown and strong challenges in the domestic economy, there is enough momentum and fundamental macro-economic strength in the Indian economy to give a good year - 2008-09, added the CII President.

CII is optimistic about the near term economic future of the country and feels that an aspirational 10% growth rate of GDP is possible in the medium term, said Mr Kamath touching the positive chord.

Inflation is the biggest challenge facing the country today.

Inflation needs to be dealt with by the government, however, the government would have the support of industry and CII in this effort said Mr Kamath.

CII will work with its membership to try and ensure that manufacturing WPI comes down to below 5.5%.

Outlining the challenges facing the economy, the CII President listed the following: Rising energy, commodity and consumer prices; Pressure on Balance of Payments; Increasing Supply Constraints; Widening infrastructure gap; equitable growth and Stagnating agriculture production and productivity as the key ones.

Each of these challenges need careful addressing, Mr Kamath said.

While the situation on inflation does not make it possible at present to consider a greater pass through of oil prices, this is a measure which would have to be taken sometime in the near future, based on the situation on inflation, said the CII President.

The situation on oil prices also mandates that the country set a target for itself in terms of conservation.

Demand management of energy consumption including greater efficiency in utilization is a must for the country, added Mr Kamath.

In the current situation of global slowdown and loss of growth impetus from the external environment, the growth stimulus has to come from within.

In this context, keeping in mind that the Indian economy is investment led, it is imperative that infrastructure gets a huge dose of public spending.

This has to be complemented by an increase in the shelf of bankable projects for PPP projects to take off.

The country needs around USD 600 billion of investments in infrastructure between now and 2015, said Mr Kamath.

Besides being the greatest bottleneck to India’s growth, the sector also has the greatest capacity to absorb huge investments and thereby keep the economy moving at a fast clip, said Mr Kamath.

Drawing attention to the episodic problem of foodgrain shortfall and the consequent rise in prices, the CII President said that the agriculture sector is in urgent need of reforms.

Be it the need of a model land leasing act or greater private sector involvement in agriculture, or large public investments in creating agricultural infrastructure, enablers are required urgently.

With more than half the population of the country deriving their livelihood from this sector, there is potential for this crisis to reach acute proportions warned the CII President.

As a shrinking contributor to the national income of the country, this sector is getting more and more marginalized, while the opportunity for alternative employment for the population dependent on this sector is not emerging fast enough.

Similar attention is required by the manufacturing sector, said the CII President.

In the last four years there have been great success stories coming out of this sector, and many Indian companies are emerging as global leaders. But the concern lies elsewhere.

In 1991, when the economy started opening up the share of manufacturing in India’s GDP was 17%.

After seventeen years of reforms, this share has dropped to 15%.

This indicates that company level success has not been emulated by the sector as a whole.

This does not augur well for Indian or the Indian economy, said Mr Kamath.

This sector is a key employment generator and must therefore, grow to represent a larger share of the pie.

CII has a set a target for the sector to represent 25% of GDP by 2020, added the CII President.

This would entail an enabling policy environment, including a friendly labour policy.

 

 

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