The Hindu Business Line : ‘Deregulating key areas vital for double-digit economic growth’

Chennai, July 18Deregulation of key areas within agriculture, industry and services holds the key for sustained double-digit growth of the economy, Mr Sunil Bharti Mittal, President, Confederation of Indian Industry, said at a press conference here.

While expressing confidence that the GDP would grow at 9.2 per cent in 2007-08, Mr Mittal said CII was concerned that the growth would largely be due to the industry and services sector, with agriculture contributing just 3 per cent. Driving growth in agriculture would enable the economy to grow at 10 per cent plus — CII’s “aspirational growth rate”.

Some of the risks are inflation, input price increase and a decline in output globally.

Agriculture reform

Crop diversification, contract farming and reforms in marketing agriculture produce were key factors that would drive growth in agriculture. These would encourage involvement of the private sector, which in turn would drive investments in the farm sector, modernisation of technology, and bring farmers closer to the markets.

Agriculture contributes to less than a fifth of the GDP but more than 60 per cent of the population was linked to the sector. Growth of industry and services would help to wean away a section of the population from agriculture while the growth in the sector would help enhance contribution to the GDP, he said.

Industry growth

To accelerate industrial growth to 12 per cent, areas such as energy, mining and food products need to be deregulated, indirect taxes rationalised, and organised retail encouraged. Some of the enabling factors would be labour reforms and development of skilled labour, improvement of transportation infrastructure, and setting up of sector-focussed clusters.

Labour shortage is being felt all over the country and across a range of industries. This calls for large-scale training and skill development, which could be achieved through the involvement of private sector in education, Mr Mittal said.

Services

Deregulation of financial services, retail and life sciences — pharma and biotechnology — would help accelerate growth of the sector. Growth of organised retailing is the only option for efficient movement of fresh farm produce to the markets and augmenting farmers’ income. Industry was taking the first few steps in this direction.

Mr K.V. Kamath, Vice-President, CII, and Director and CEO, ICICI Bank, felt that the interest rates were bound to drop. Liquidity was good, deposit inflow was strong and interest rates were not likely to harden further. Overall momentum would be in the “nine per cent plus” region.

Mr Mittal said that in all countries where organised retailing has established, the markets have grown and supported small retailers also.

Retailing is expected to grow to about $500 billion from the present $300 billion dominated by the small retailers. Organised retailers would garner about $100 billion while the rest would continue with the small retailers who would only benefit from the growth, Mr Mittal said.

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