Touching the horizon
By Gopal K Agarwal,
GROSS domestic product (GDP) is the
broadest measure of the health of the economy. Real GDP is defined as the
total money value of final goods and services produced by labour and property
located within a country during an accounting year. Gross value includes that
part of fixed capital also which is consumed during the year that is,
depreciation. It does not include net factor income earned abroad. GDP is a
measure of domestic production, it includes production within national borders
regardless of whether the labour and property inputs are domestically or
foreign-owned.
By 2050, India is projected to become the third-largest economy in the world, behind China and the US, according to a recent report by Goldman Sachs. By another estimate, China, India, Russia and Brazil could outrank the combined economic might of today's Group of Six (G-6) and the UK by the middle of this century. According to the Organisation for Economic Cooperation and Development (OECD), in its latest issue of the Science, Technology and Industry Scoreboard, India has spent about $19 billion on research and development in 2000-01, putting it among the top 10 countries with the highest R&D spending. The World Bank says India can achieve economic growth of 8 percent during the Tenth Plan period only if it undertakes comprehensive reforms and reduces its internal debt and fiscal deficit. The International Monetary Fund forecast says India's economy is on an upward trajectory and its GDP is expected to record "close to 7 per cent" growth this year, and the target is 8 per cent growth in future.
The 11 per cent growth in exports
and 19 per cent growth in imports clearly indicate an economic turnaround in
the country. The export growth rate is the second highest in the world, next
only to China, and hoists India's share of world trade to a high of 0.8 per
cent. Foreign exchange reserves have reached an all-time high of $91 billion.
Experts, however, caution that some
"pressure points" still exist in the economy, largely on account of subsidies
on food and some petroleum products. Moreover, in order to achieve a high
growth rate at the national level, it is important to identify areas of high
growth potential both in terms geographical as well as sectoral. In India,
being a huge country with vast inter-regional and intra-regional disparities,
decentralisation of resources, planning and decision-making should be the
main strategy.
The government adheres to the view
that the private sector and the market must play an important role. There are
areas, such as infrastructure development, where gaps are large and the
private sector cannot be expected to step in significantly.
The government assigns the highest
priority to agricultural development, because growth in this sector is likely to lead directly to the widest spread of benefits, especially to the
rural poor. It is pointed out that the first generation economic reforms had
concentrated on reforms in the industrial sector and now agriculture should
take its place. Second, the growth strategy of the Tenth Plan must ensure rapid
growth in such sectors that are most likely to create high-quality employment opportunities- sectors such as construction, tourism and transport deserve
support. We need to sincerely examine whether the resources used for poverty
alleviation schemes and for various types of subsidies in the name of the poor
may be more effective in alleviating poverty or if they are directed to various
types of asset creation programs in rural areas.
In the expenditure control area, two
areas need focus first is subsidies, both direct and indirect, and the second
is the pension liability of the government, which is the fastest growing
component of current expenditure. Currently, these liabilities are unfunded
and signify a claim on the general revenues of the government. If the
government is successful in strongly moving towards its goal of economic
prosperity, India is bound to emerge stronger. The goal is in sight, the path
is clear, the rest is up to us.
(The
writer is a member of the BJP's central economic cell)
