More public goods needed to increase per-person income

Our Bureau Chennai | Updated on January 11, 2012 Published on January 11, 2012

The economy is headed towards lower inflation, said Mr Dipak Dasgupta, Principal Economic Adviser, Ministry of Finance, Government of India.

“In December, food inflation — or, the core inflation — went into negative territory. Early results on food prices indicate that we will be heading towards lower inflation moving forward.”

This, hopefully, will ease the pressure on monetary policy, said Mr Dasgupta, at a panel discussion on ‘The State of the Indian Economy' organised by the Southern India Chamber of Commerce and Industry.

The per-person income in India, which took four decades to grow by four times to $400 from $100 in 1950, quadrupled in just 20 years to $1,600 (from 1990 to 2010). In the next 20 years, “we are looking at quadrupling to $6,500,” said Mr Dasgupta. But this will be a “long haul” ridden with challenges.

The Indian economy is caught in the challenges of a “middle-income trap.” To tide over these, the country needs to provide public goods, such as schools, roads and water. “We also need to find resources to provide these goods. One also has to ensure the quality of these public services,” said Mr Dasgupta.

For sustained GDP growth, the economy has to keep the employment engine going and cannot afford to lose jobs, said Mr Dasgupta.

Inflation in 2011-12 is estimated at 9.2 per cent and GDP growth is likely to be at 7.3 per cent. Dr D.K. Srivastava (Director, Madras School of Economics) said the Government's target should be to get the economy back to a GDP growth of over 9 per cent and contain inflation around 5 per cent. “We have had 13 hikes in repo rates. But only using money supply intervention is proving to be ineffective to tackle inflation.”

Commenting on the constraints of banks in lending, Mr Sharad Sharma (Chief General Manager, State Bank of India, Chennai Circle) said Basel II/III guidelines may require banks' capital to increase by Rs 7 lakh crore by 2019. To achieve GDP growth of 9 per cent, bank credit would need to grow by 25 per cent annually.

Mr D. Sampath Kumar (Editor, Business Line) said despite running the Integrated Child Development Scheme since the 1950s, there is rampant malnutrition in the country.

Published on January 11, 2012
This article is closed for comments.
Please Email the Editor