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Economists pitch for further reforms

Special Correspondent

GDP growth of 8-10 p.c. in Eleventh Plan `feasible'

NEW DELHI: Following a "cautiously optimistic'' outlook on the economy, economists on Saturday called for big-bang reforms and improvement in infrastructure to push up GDP growth to 8-10 per cent in the Eleventh Plan.

In what is called a "mid-year review of the economy,'' the economists came out with factors that might hinder the growth process. The factors particularly mentions risks like fiscal imbalances, high oil prices, faltering infrastructure and political risks associated with a coalition government that may hinder the growth process.

Economist and director of the National Institute of Public Finance and Policy M. Govind Rao presented the review and also cautioned that if the oil prices continue to rule high, the chances of higher inflation and firming up of interest rates could not be ruled out.

"By all accounts, Indian economy is expected to continue its buoyant performance during 2005-06," he said.

"The average annual growth rate for the last three years works out to 7.5 per cent. It is therefore argued that achieving 8 per cent growth during the Eleventh Plan is within the realm of feasibility,'' Mr. Rao said, referring to the projections made about the growth rate by various agencies including leading chambers.

He said further reforms were imperative to sustain the high growth and advocated fiscal, tax, agriculture and labour reforms along with speedy disinvestment and privatisation.

Kanaiya Singh of the National Council of Applied Economic Research (NCAER) pointed to glaring gaps in the infrastructure sector and the proposed tax reforms. NCAER, which has projected a 7.19 per cent growth, was likely to revise it upwards following a better monsoon and a higher farm growth, he said.

Mr. Rao said tax reforms were necessary to reduce costs and augment revenues of the government. He also pitched for a full-fledged implementation of VAT and gradual movement towards a Goods and Services Tax by integrating excise and service tax besides addressing regional disparities in growth.

"If the reforms are implemented, the economy can grow consistently at 8 per cent, even 10 per cent during the Eleventh Plan," he said.

However, he wondered whether special interest groups will allow the reforms to be carried out and will we be able to create an enabling environment to unleash creative energies to improve the living standards of the people.

Plea for national VAT

Industry has pitched for a definite deadline of three-five years to introduce national-level value added tax to eliminate the cascading tax impact on the national income.

Pointing out that indigenous production suffers because of cost disadvantage of 8 to 20 per cent due to cascading effect of taxes, the Associated Chambers of Commerce and Industry has said such extra costs from indigenous manufacturers ought to be eliminated without losing any further time if the country were to transform itself into a manufacturing hub.

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