FMs options for achieving 9% growth

  • 20/02/2008

  • Economic Times

AFTER putting up a rather robust macroeconomic performance over the past five years, the Indian economy is now facing some challenges. One expects that the finance minister will address these challenges in a manner that the economy is able to sustain the 9% plus growth trajectory uninterrupted. First of these challenges is to overcome the crisis of confidence emanating from the subprime crisis in the US and the resulting global slowdown. Given the growing exposure of the Indian economy to the US economy, it is bound to affect us. It might affect us in a compounded manner if the slowdown of the US economy also leads to a slowdown in India's other major trade partners such as the EU and the East Asian countries. This needs to be addressed by increasing public investment in a significant manner especially for development of physical and social (viz. education and health) infrastructure. Greater public investment in infrastructure normally crowds-in more private investment. Hence, it might help in reviving the sentiment. Having made substantial progress towards fiscal consolidation over the past four years, the finance minister need not be concerned about the effect of raising public investment on the fiscal deficit. Even though he may not wish to reduce income tax rates, atleast one anomaly can be addressed that concerns differential treatment of salaried tax payers vis-