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ADB upbeat about India, predicts 7% growth rate

The Asian Development Bank, or ADB, appears extremely upbeat about India's economy, predicting a growth-rate of 7 per cent in 2000-2001, arguing that political instability and nuclear-related sanctions have failed to adversely affect the nation's development process.

Its report, 2000 Asian Development Outlook, released in Washington on Tuesday, notes that India's growth-rate, 5.9 per cent in 1999, 6.8 per cent in 1998 and 5 per cent in 1997, will touch 7 per cent mark this year.

The higher growth path would be sustained in 2001, it says.

The document, however, warns that infrastructure bottlenecks are likely to contain the achievement of higher growth path of 7 per cent and above, a pre-requisite to fight poverty.

It criticises some of the government's poverty alleviation programmes characterised by high costs and minimal impact.

Making out a strong case for massive investment in infrastructure, in public and private sectors, it recommends a two-pronged approach: mobilising private investment to support the public sector efforts and garnering public investment in the sectors where private investment is difficult to mobilise.

It also calls for large investment in social sector because the poor state of human resource development is an even more serious constraint to sustainable development.

The report notes that neither the frequent changes of government nor financial crisis in East Asia had a lasting impact on the general direction of economic reforms on which there is a national consensus.

The reform process not only survived but also got strengthened through these changes.

Sanctions imposed by Group of Seven, or G-7, countries, led by the United States, following nuclear tests by India and Pakistan in May 1998 added new uncertainties, but their effect has been marginal, it adds.

It, however, says that the initial urge and excitement generated by the reform process abated as the economy recovered from the 1991 crisis.

Consequently, the ability of policy-makers to make radical changes greatly diminished and special interest groups blocked the progress of reforms on several occasions.

With the slowing of reforms, the ADB document points out, it became evident that the growth impulses generated by the first generation of reforms had ebbed by the mid-1990s.

Industrial growth significantly decelerated and exports growth fell. Infrastructure bottlenecks began to hamper the expansion of private sector economic activities. The worsening environment aggravated the problem of poverty, illiteracy and lack of basic healthcare.

It says the slowdown in gross domestic product, or GDP, in 1997-1998 raises a serious question: does the economic slowdown reflects structural impediments that could lead to lower growth rate if not tackled urgently?

It says reforms must ensure that the private sector, not the government is in-charge of raising production, creating jobs and increasing income levels.

It, however, says that dependence on private sector and markets does not mean that the government has no role. Re-orienting its contribution to economy is crucial and government can help create conditions for accelerated growth.

The inefficient and oversized bureaucracy and the outdated and non-responsive legal systems are hurdles to progress, it adds.

UNI

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