The Hindu Business Line : Overheating is cyclical, says Rangarajan

Mumbai April 9 The Chairman of the Economic Advisory Council to the Prime Minister, Dr C. Rangarajan, said though there are some signs of overheating of the economy, it could be best described as cyclical overheating. And, he cautioned that care should be taken to prevent it from becoming structural over-heating.

As efforts were on to tackle the consequences of the cyclical overheating, such as inflation, attention should be on removing structural bottlenecks that could develop as constraints on economic growth. In this context, he said, availability of power assumed importance.

Dr Rangarajan was addressing the Bombay Chamber of Commerce and Industry here on Monday.

On the current growth rate, Dr Rangarajan said, "We need to translate growth into poverty reduction." The need was to generate poverty-reducing growth — growth to which the poor contribute and from which they could benefit. For this, employment opportunities should be expanded and productivity improved.

Six challenges

Dr Rangarajan outlined six challenges that warranted priority attention to sustain the high growth rate and to accelerate it. First, agriculture production had to be stepped up. Low yields and the inability of farmers to exploit the advantages of the market were the most critical problems, he said. The second challenge was infrastructure deficit, particularly power. To mobilise necessary resources and build quality infrastructure, appropriate legal, regulatory and administrative frameworks had be put in place to attract domestic and foreign investment.

Fiscal consolidation was a necessary pre-requisite to sustain growth. Frequent tampering with fiscal responsibility and budget management targets would erode credibility. Another important challenge was to build social infrastructure. Globalisation could not be wished away and more than many developing countries, India was in a position to wrest significant gains. Good governance implied an administration which was efficient, effective, clean and freely accessible to people.