Inclusive

New Delhi, June 4 (UNI) Welcoming the growth in Gross Domestic Product (GDP) to 8.4 per cent in 2005-06, CII President R Seshasayee today said the economy needs a set of structural reforms, not just to improve the performance of the economy and industry in particular, but also to create inclusive growth.

''It is imperative that we look at growth keeping in mind the fact that it must be inclusive, sustainable and be supported by innovation,'' Mr Seshasayee said Acknowledging the revival of the farm sector, riding on normal monsoons, he stated that this would give the much-needed boost to rural demand.

''This should translate into better prospects for industry and services in the current year, considering the lag with which this growth is translated into demand. This boost to the rural economy should help in the quest of inclusive growth,'' a CII release quoted him as saying.

However, expressing disappointment at the 9.0 per cent growth in manufacturing as against the advance estimates of 9.4 per cent growth and mining at only 0.9 per cent as against 5.8 per cent in the previous year, the CII President said this is an area of concern.

The aspired double-digit GDP growth is possible only if industry, including manufacturing, mining and construction, electricity, gas and water supply, achieves a growth of 12 per cent and beyond.

Such an industrial growth would of course have to be supplemented by a higher growth in the services sector, which seems to be gradually transitioning into the double-digit growth trajectory, he observed.

The reforms initiated by the government since the 90's, in the four areas of product market, land market, infrastructure development and reduced government ownership, have yielded impressive improvement in the industrial performance and GDP growth.

Industry, which grew by an average of less than six per cent during 1991-2001, started growing in excess of seven per cent during 2002-05 and could have achieved a higher growth rate but for the four sectors-- power, rubber, plastic and refining, mining, and agro and food products-- clocking less than five per cent growth for the last three years.

The drag has been created particularly by electricity, gas and water supply (5.3 per cent), and mining and quarrying (0.9 per cent).

Taking note of this slackness, Mr Seshasayee suggested creation of an Energy Commission for developing and implementing an integrated energy policy covering power, coal, oil and natural gas, non-conventional and nuclear energies.

A competitive and vibrant wholesale power market an be developed, by implementing multiple measures spanning the entire electricity value chain and increasing the role and guidance from the centre through stronger incentives for states that expedite reform, he said.

The CII President also stressed on boosting physical infrastructure by incentivising investments in infrastructure by a mix of fiscal support, tax concessions and enhanced credit guarantee.

States need to be persuaded to find innovative modes of raising resources for basic infrastructure.

To invite the critical 'crowding in' from private sector in supplementary infrastructure, the government would need to provide basic infrastructure, said Mr Seshasayee.

The above initiatives need to be backed by sector specific initiatives, where India has a competitive advantage, but is facing a reversal owing to certain specific policy constraints.

UNI CS SY KP1356