labels: economy - general, economic survey 2007
Constraints to growthnews
27 February 2007

The Economic Survey 2006-07, tabled in the Parliament today, may have painted a positive picture of the Indian economy, but has not failed to point out the constraints that hobble its growth.

The investment scenario looks quite optimistic, it says, rising as it is with growing domestic savings and FDI inflows. However, the survey says, investment will have to be channelled towards capacity additions, if industrial growth is to be accelerated. In this regard it mentions that sustained economic growth, fiscal consolidation and an enabling policy environment will continue to provide incentives for capacity additions, and a basis for its sustained growth.

The survey strikes a note of warning with regard to the expansion of employment opportunities in the industrial sector, particularly in the organised segment. According to the survey, employment opportunities in the organized sector will be enhanced mainly through the building up of the skills reservoir in the country. This can occur if an increased emphasis is laid on a wide variety of vocational training, coupled with an increasing flexibility in labour laws.

In the years to come, says the survey, it will be a meaningful progress on these fronts that will determine the growth of employment in the organized sector.

The survey also says that domestic reforms will have to be deepened further if the current dynamism, evident in the country''s exports, is to be sustained on a long-term basis. It says that this will only be possible if constraints like infrastructure bottlenecks, outdated/inflexible labour laws, SSI reservations and high transaction costs are reduced. In this regard the survey also calls for a calibrated policy of phasing out export incentive schemes, along with a lowering in basic custom duty.

In turn, the survey says, exporters need to turn their attention towards placing more emphasis on non-price factors, such as product quality, brand image, packaging, delivery and after-sale services.

The survey also recommends that export industries be opened more aggressively than hitherto to foreign direct investment (FDI). Such an aggressive approach, it says, will not only increase the rate of investment in the economy, but also infuse new technologies and management practices in export oriented industries, which could result in an increase in exports.


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Constraints to growth