The Economic Survey lays out the path to higher growth in India. It prescribes a growth rate of 7-8 per cent. With the magic of compounding, this can transform India into a developed economy within two decades. What is needed is efficient infrastructure, over 10 per cent growth in industry, over 4 per cent growth in agriculture, fiscal consolidation, the new pension system and monitoring outcomes in the social sector. The recipe for growth in infrastructure lies in user charges, private sector production and in regulatory frameworks that foster competition. Viability gap funding models that leverage public money through public-private partnerships show the way forward. The experience of roads, telecom and ports highlight the role for private production in the provision of public goods.The recipe for industrial growth is dereservation of small scale industry, foreign direct investment and nurturing the recent improvement in the investment environment. Agriculture, says the Survey, needs to grow at 4 to 4.5 per cent. It recommends reforms that requires policy to move away from the cereal bias. For higher growth, it calls for higher yields and diversification away from cereals to high-value and labour intensive crops and allied activities. It asks for a rethink on the minimum support price regime which distorts prices for agricultural items. Foreign investment is recommended, not just for the funds it brings, but also for the technological knowhow, improved corporate governance practices and access to foreign markets that come with it.The prescriptions are clear. The way forward is economic reform. The question is: will the government accept this advice? The first budget of the UPA will be the test. It will set the tone for the coming years. According to the Survey, the government needs to nurture the investment climate. What is the best thing the finance minister can hope to achieve? P. Chidambaram has already declared his ambition to be known as the minister for investment. For starters, he can hope to recreate the investment climate of the early ’90s. India’s best growth ever was in the three-year period covering ’94-’95 to ’96-’97, where we got 7.25 per cent, 7.34 per cent and 7.84 per cent growth in GDP. This high growth gave us strong results in terms of poverty reduction and increased employment. It did more for poverty reduction and employment growth than Rs 100,000 crore being spent through sarkari programmes. As the Survey notes, the poverty ratio declined from 36 per cent in ’93-’94 to 26 per cent in ’99-’00. The key driver for the growth was investment. For reforms to be pro-poor, they must be pro-growth. The path forward lies in increasing the size of the pie.
