The Hindu : Karnataka News : States advised to follow productivity-centric policies

Online edition of India's National Newspaper
Wednesday, Dec 08, 2004

Karnataka

Karnataka

States advised to follow productivity-centric policies

By Our Staff Reporter

BANGALORE, DEC. 7. John B. Taylor, Under Secretary for International Affairs in the United States Department of Treasury, has urged Indian State governments to follow fiscal policies that will help increase productivity but do not necessarily include subsidies.

He was speaking at an ineraction with the faculty of the Indian Institute of Management, Bangalore, on Tuesday.

Mr. Taylor drew parallels between problems faced in recent years by Indian States such as Karnataka and American ones such as California. Mr. Taylor had similarly urged California as a member of that State's Council of Economic Advisors, which addressed many of the same questions that Karnataka and other Indian States faced with regard to management of public finances.

`Create opportunities'

Policies that boosted productivity and reduced poverty need not include subsidies, Mr. Taylor said at an interaction with the faculty of the Indian Institute of Management, Bangalore, on Tuesday. The key was to implement measures that created opportunities to those who had been left behind.

Impressed with UP

"I have witnessed the benefits of productivity-enhancing measures in Uttar Pradesh, where I visited a World Bank project designed to introduce farmers to new technology, with tremendous results."

Mr. Taylor, who spoke at the India Economic Summit of the World Economic Forum in New Delhi on Sunday, said his biggest concern was not the length of the current global expansion, but its strength. An important goal of the Bush Administration was to reduce poverty by raising economic growth around the world.

In India, with the right policies, an 8 per cent growth in economy was possible through a combination of 6 per cent growth in productivity and 2 per cent growth in employment. This required policies that encouraged investors (such as eliminating long-term capital gains tax) from outside the country and build human capital at home.

College education

To move from low productivity sectors to the high productivity sectors, India must invest in making college education accessible to over 5 per cent of the college-age population, he said.

Mr. Taylor, who met the Union Finance Minister, P. Chidambaram, will also meet the Finance Department officials in various States in India.

Bangalore was a first rate example of the impact economic freedom could have on economic growth, he said.

He would also visit various research and development facilities here, he added.

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