New vistas open up for the economy
|
There is confidence now to attempt double digit growth in the next Plan
|
THE TERMINAL year of the Tenth Plan may well prove to be a major landmark in the history of India. The GDP growth this year is estimated at around 9 per cent while the average growth for the Plan period will be over 8 per cent against 5.4 per cent in the Ninth Plan.
This year's performance, which follows three successive years of 8 per cent growth, has given rise to confidence that double digit growth can be easily attempted in the Eleventh Plan, with efforts already on to strengthen agriculture and allied activities.What is heartening is the consistent rise in production of leather and plantation products and rsing foreign direct investment in automobile, consumer electronics, telecommunication and to some extent hardware industries. The gaps in the industrial sector are getting filled, especially as the Special Economic Zones (SEZs) will be growing in importance in the next Plan.
The service sector has also been achieving impressive results. Forex earnings from software exports are growing steadily while income from foreign tourist traffic and medical and other services will be increasing in volume over a period.
Attractive destination
As India is considered a good base for their operations by foreign multinationals and Indian enterprises have been improving their competitive ability, faster rise in exports has been possible with the effective utilisation of capacity of the major industries created over the years. As modernisation, expansion and new schemes are also being implemented concurrently on ambitious lines, there will be no slackening in the growth rate in the coming years.
The large trade gap, however, will tend to decline noticeably thanks to the sharp fall in world crude oil and petroleum product prices in recent months. The drop of over $15 a barrel in the past few weeks alone has given rise to hopes that the current account deficit for 2007-08 may be insignificant and may even turn into a small surplus.
In view of the increasing economic activities, it is being discussed whether new measures will be needed to improve liquidity in the banking system and indeed in the financial sector and amend the Banking Development Act to enable banks to raise additional resources from within the country and abroad.
On the other hand, chiefs of a few major banks have allayed fears of a squeeze in the money market. They feel there is ample liquidity to expand credit at the desired pace. However, banks have to augment their resources, in spite of a new trend in deposits. It was so far possible to meet the demand of borrowers only with a reduction in investments. The SLR ratio of 25 per cent could be observed thanks to the excess investments earlier.
The Central Government is reported to have approved the promulgation of an Ordinance for doing away with the stipulation of a minimum SLR of 25 per cent. This move, when it comes about, will enable the central bank to vary suitably the SLR in the light of happenings in the money market.
These measures will, of course, only help in sustaining credit expansion as visualised. It will become necessary to augment considerably the pool of resources in various ways with the new financial sector reforms contemplated by the Government.
P. A. SESHAN
Printer friendly
page
Send this article to Friends by
E-Mail
Business
