Economic Advisory Council calls for more public investment

Calling for more public investment, the Prime Minister’s Economic Advisory Council (EAC), chaired by Dr C. Rangarajan, today forecast a near 8 percent rate of growth in 2006-07, following three years (2003-2006) of 8.1 percent growth.

If it happens, this will be the first time in the history that the Indian economy would be growing at 8 percent for a continuous span of four years.

In an upbeat assessment of the economy’s performance last year and prospects for next year, the EAC called for better infrastructure, more public and private investment in infrastructure, as a necessary condition for sustaining these high rates of growth.

According to a PMO release, the EAC has also drawn the Centre’s attention to the need for “reasonable rates of interest”, and for lower fiscal deficit, particularly revenue deficit.

Forecasting a 7.9 percent rate of growth in 2006-07, the EAC said this would come from 1.5 percent growth of output in agriculture, 9.7 percent in industry and 9.5 percent in services sector. The sub-sectors driving growth in fiscal 2003-06 were manufacturing, construction, communication and financial and business services.

Despite rising oil prices, due to which inflation in the country has gone up from 4.1 percent last year to 5.5 percent this year, the EAC said it believed that global growth would be sustained and that there were no significant external constraints for the expansion of the Indian economy.

The EAC underlined that agriculture remains a major area of concern, partly because of its continued dependence on rainfall and partly because of stagnation of yields.

“There is need for a vigorous push for new technologies, particularly for rain-fed crops, their active dissemination through extension supported by inputs, credit and rural infrastructure. Energy and other infrastructure pose the main constraint on acceleration of growth of manufacturing,” said the release.

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