NEW DELHI (AFX-ASIA) – Prime Minister Atal Behari Vajpayee said he could see “danger lights flashing” due to the slow pace of economic reforms, particularly in the power sector, which threatened to increase unemployment.
“The rate of growth of the labour force during the coming years will be such that unless we accelerate economic growth, there will be a worrisome increase in the level of unemployment,” Mr Vajpayee told a meeting of the National Development Council (NDC) in New Delhi.
“We cannot allow such a situation to develop.”
He said it is vital to reform the nation’s energy, transport and water infrastructure.
“In particular, I can see danger lights flashing because of the slow pace of reforms in the power sector,” he said.
Mr Vajpayee, however, added that the Indian economy has shown “great resilience in the face of adversity — both domestic and global. Already, trends of revival and growth are visible in many sectors. If we remove the many constraints and hurdles in agriculture, industry and services, India’s economy will undoubtedly attain a higher growth rate.”
India’s GDP growth rate in the current financial year is expected to be around 5 to 5.5%.
To ensure a more “investor friendly climate”, Vajpayee proposed the setting up of a committee to oversee the “dismantling of barriers” to trade. He listed fiscal deficit — both at the federal and state levels — as his “biggest worry”.
To ensure fiscal consolidation there is a need to enhance revenues, and address the problem of “untargeted, runaway subsidies. The finance ministry is preparing a paper on reform of subsidies,” he said.
“We should put in place a firm roadmap for applying correctives in a time-bound manner to ensure they reach the poor and are not siphoned off by others.”
He blamed most of the problems on poor implementation of laws.
“Our experience has shown that adequate resources are not enough and that the best policies and programmes can flounder on the rocks of poor governance and implementation. We need to bring about dramatic improvements in the functioning of our administrative, judicial and internal security systems,” he said.