The Hindu Business Line : ‘Need to find better ways to manage inflows’

Hyderabad, Nov. 24 The country’s current account deficit, estimated at about 1.8 per cent of GDP, has the potential to go much higher to about 3 per cent as against foreign inflows of about 4.5 per cent, according to the Union Finance Secretary, Dr D. Subba Rao.

“The current account deficit could be much higher than what it is. However, we need to evolve ways to better manage foreign inflows,” Mr Rao said answering queries after delivering the CC Desai Memorial Lecture on Elephants Too Dance: The India Growth Story. Should we initiate measures to tackle concerns of rising rupee and high inflows? “All that we need to do is to find better ways to manage foreign inflows.”

The Indian economy has managed to sustain a growth rate of about 8.5 per cent and this needed to be sustained. Dr Rao cited a few challenges which included stepping up agricultural production, expanding employment opportunities, improving service delivery and managing globalisation, to sustain growth.

Elephants too dance

“As a people, we are understandably eager for our economy to sprint like a tiger rather than amble like an elephant. Yet, few animals have an elephant’s stamina. And elephants do not always amble; they dance too. And when elephants start dancing, they can go on for a long, long time, provided the stage is clear,” Dr Rao said. Contrary to popular perception, he said “India is quite a globalised economy. Our two-way trade is now 35 per cent of GDP and if we add in invisible flows and two way movement of capital flows too, the ratio goes up.”

Creating jobs

Expressing concerns about some of the areas which require attention, Dr Rao said that farm productivity has to increase, and more graduates need to be groomed to be employable. While a big chunk of labour from the farm sector need to find jobs in the services sector, if the agricultural productivity increases, the sector will disgorge 100-150 million labour, and they will have to find jobs in other sectors . Another important concern relates to about 150 million jobs being trapped in low productivity employment.

In spite of challenges, there is evidence to show significant acceleration of capital expenditure, much of it in fresh capacity creation.

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