The Hindu Business Line : ‘Overall economic situation still buoyant’

The inflation rate was running nearly one per cent above the 5.5 per cent and trade deficit has widened. But these signs have (now) abated. — Dr C. Rangarajan

Our Bureau

Hyderabad, Nov 15 The overall economic situation remains buoyant despite some sectors in the economy showing weakness in terms of growth, according to Dr C. Rangarajan, Chairman, Economic Advisory Council to the Prime Minister.

Speaking at the TiE-ISB Connect 2007 here on Thursday, Dr Rangarajan said, “Contrary to the concerns of overheating, some concerns have been expressed about the possible slowdown. The rupee appreciation has its impact on exports and domestic production. Nevertheless, we should be able to achieve 8.5 per cent to 9 per cent growth this year.”

Observing that some macro-economic parameters were in the right direction to sustain high growth over the medium term, the former governor of RBI said that the XI Plan projection for the gross domestic saving rate of 32.3 per cent had already been achieved.

In the short term, there were signs of ‘overheating’ towards the end of the last calendar year and in the first quarter of the current year.

“The inflation rate was running nearly one per cent above the 5.5 per cent and trade deficit has widened. But these signs have (now) abated,” he pointed out.

While the macro-economic policy environment had been made conducive to rapid economic growth, there should be more action at the enterprise level in Indian industry, he said adding: “At the minimum, they must be able to meet global competition and the search for new competitive advantages must be made earnestly.”

To sustain the current growth rate and translate growth into poverty reduction, there were many challenges to be tackled such as stepping up agricultural growth, infrastructure development, fiscal consolidation, building social infrastructure, managing globalisation and good governance, he opined.

“Among the six challenges I had indicated, the three most important are agriculture, infrastructure (power in particular) and good governance,” Dr Rangarajan pointed out.

Higher growth in agriculture should come from improved productivity which will enhance quality of employment, if not, the quantity, he said adding, “We need ideas and the capacity to turn them into policies and programmes.”