WB economist concerned at India's narrow-based economic growth

Mumbai, Mar 8: India is all poised to emerge in the forefront among developed nations in the 21st century with a robust economy, but there are still some major areas of concern, according to Dr Priya Basu, the World Bank's Economist (Finance and Private Sector--South Asia), here.

Delivering the fourth H M Trivedi Memorial Lecture on 'Accelerating Reforms for Higher Economic Growth', organised by the Indian Merchants' Chamber last evening in Mumbai, Dr Basu said, ''India's growth is not yet broad-based, but hinges on only a few areas of services such as software and IT-enabled services, which account for over 55 per cent of India's GDP, while India in the post-Independence era was a success story, especially so at the macro level.'' Describing this as ''an area of concern'', Dr Basu pointed out that though the manufacturing sector was picking up, it still could not realise its full potential for want of infrastructure.'' She also expressed concern at the agricultural sector's growth which she described as ''growing at a snail's pace.'' Lamenting that private investment was not forthcoming in infrastructure, Dr Basu said there are too many hurdles like an unduly long time taken to obtain government clearances, uncertainty and lack of clarity about government policies and inadequate or lack of regulatory frameworks.

''The World Bank studies have found that a prospective investor has to wait for a period from 18 months to five years for getting government clearance for infrastructure projects like power. Though there is a lot of talk on public-private partnership in the infrastructure sector, precious little actually takes shape,'' she pointed out.

''As against this deplorable scenario in India, the government investment was as high as 70 per cent, private investment 20 per cent and others 10 per cent in many East Asian countries,'' she said.

Expressing the need for foolproof business regulations to require service providers to be more accountable to consumers and owners, Dr Basu called for provisions to make entry and exit of industries easy in terms of both cost and time. ''For instance, it takes 71 days for registering a business entity in India, and 45 days in China, but only two to three days in any developed country. Licence raj has of course vanished, but inspector raj continues to flourish in post-liberalisation India,'' Dr Basu alleged.

She said that labour regulations were yet another major bottleneck, slowing down the growth of Indian economy and employment generation.

Describing the financial sector as ''being far deeper, more vibrant and stable than what it used to be before liberalisation,'' Dr Basu said it was still unsuccessful in meeting the full credit needs of the people and industry.

''People in the rural India do not have easy access to banking services with over 59 per cent having no formal access to deposits and over 79 per cent of them having no access to credit,'' she pointed out.

She said the financial sector in India never tried to make innovations in lending nor did it venture into inventiveness in its operations, but always sought the easy escape route of investing in government securities.

Highlighting the growing economic disparities between the country's various states, Dr Basu drew attention to the ever-increasing gap between the per capita incomes of people in states like Bihar and Maharashtra, in the post-liberalisation era.

''As the former (Bihar) failed to attract private investment in any significant way. This situation was not only causing increasing law and order problems, but decline in infrastructure investment in critical areas such as education, health, road connectivity, and power generation and supply,'' she said.

Enumerating some steps to remedy this situation, Dr Basu called for accelerating reforms in the rural and agricultural sector by stepping up agro-based industries, high value addition to rural produces and crafts, irrigation, crop diversification, horticulture, floriculture, dairy industry, promotion of tourism and other innovative areas.

UNI