The Economic Survey considered to be a policy of the government wants the country to be cool about the scorching hot economyâ€™s rapid growth, especially since there are still several challenges facing the country.
Whatâ€™s more, these challenges are growing much faster than development. While the Economic survey observes that the economy appears to have decidedly taken off and moved from a phase of moderate-growth to a new phase of high-growth, It calls for â€œcalibratedâ€™ measures to contain inflation while maintaining growth.
Other areas of concern are the same, old worries including slow growth in agriculture and rising unemployment.
But the document is not bereft of some positive news. Projecting a 9.2% GDP growth for the current fiscal year, the survey notes that the growth momentum is sustainable, even though containing inflation would be a challenge.
It points out that global experience indicates that a troublesome inflation need not be the price to be paid for favorable high growth, adding. There is no scope for uneasiness or nervousness about high growth.
A quick-fire solution to the ever increasing inflation was difficult, finding immediate answers to inflation induced by commodity specific supply shortfall is difficult. The fight against inflation has to be calibrated without comprising growth. Seemingly, it will take some more time to cool prices as one continues to pay more for food products.
Poor farm growth to further push prices:
Poor agricultural performance will be a challenge to stable prices because of inadequate investments, incentive and post-harvest value addition had contributed to a â€œlacklusterâ€? farm sector growth
After an annual average of 3% in first five years of the new millennium starting 2001-02, growth of agriculture at only 2.7 % in 2006-07 on a base of 6% in the previous year is a cause of concern. The countryâ€™s food grain production could fall 11 million tons short if the target 220 million tons, putting further pressure on food prices that are already at a high.
Housing and real estate constitutes not only a major proportion of national wealth but also an important and fast expanding component of the service sector of the economy. Because both lenders and borrowers may have large exposures, financial balance sheets may be affected by any large volatility of prices in this sector. It is desirable to monitor housing and real estate prices for formulation of appropriate monetary and fiscal measures, it noted.
Jobs not matching Economic growth:
Employment has grown faster than before, the rate of unemployment also went up from 2.8 to 3.1 % from 1999-2000 to 2004-2005. Employment rate has gone up from 1.6% in 1993-2000 to 2.5 % during 1999-2005. Private sector offered more jobs and rose from 0.44% in 1983-94 to 0.61% in 1994-2004. But public sector jobs witnessed a decline of 0.80 %. While construction, services, transport and communication contributed to employment growth manufacturing fell short.
Savings shot up to 32.4% of the GDP. But government or public savings declined from 2.4% of GDP in 2004-05 to 2% the following year. Household savings continued to be the dominant contributor to gross domestic savings, accounting for 30.4% of the total 32.4%.
A dramatic element in the saving profile of the Indian economy has been the sharp rise in the savings rate of the private sector for four years in a row with the private sector rate for 2005-06 being pegged at 8.1%.
The social infrastructure is unable to keep pace with rapid GDP growth. India lags behind most nations in elementary education, income, health and life expectancy. UNDP Human development report for 2006 ranked India a poor 126 among 177 countries. Only judicious expenditure by Central & state governments, understanding priorities, will be able to overcome this problem.
Finally, thereâ€™s a word of caution over the much-hyped Indian growth story, coming from none than the governmentâ€™s own team.