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Economists for course correction in budget

Special Correspondent

Larger investments in infrastructure, farm sectors urged

— PHOTO: SHANKER CHAKRAVARTY

ON GROWTH TRACK: Union Finance Minister, P. Chidambaram, along with Pawan Kumar Bansal (right), Minister of State for Finance, during the pre-budget meeting with economists in New Delhi on Saturday.

NEW DELHI: Leading economists on Saturday advocated larger investments in sectors such as agriculture and infrastructure while urging Finance Minister P. Chidambaram to take some bold steps by way of `mid-term corrections' in the budget for the new fiscal.

Participating in a pre-budget meeting here, the economists hailed the Centre's efforts to put the economy on a high growth track but warned that the country's medium-term GDP growth rate could be affected owing to lack of investment in these two critical sectors.

Exuding confidence that a nine per cent GDP growth this fiscal would be within reach even in the wake of inflation at around five per cent, the economists advised increased budgetary support for completion of irrigation projects and research and development (R&D) along with a streamlining of farm subsidies and introduction of a goods and service tax (GST) by 2009-10.

"There is a need to give incentives to foreign institutional investment in infrastructure, besides special incentives to labour-intensive exports and R&D in major sectors,'' the Director-General of Research and Information Systems for Developing Countries (RIS), Nagesh Kumar, said.

Urging initiatives in the budget for 2007-08 to enhance the country's global competitiveness in various sectors, he said India could not aspire to be a superpower on the strength of a few select areas such as information technology, pharmaceuticals and the auto sector.

The Director, Madras School of Economics, D. K. Srivastava, argued that this was the right time for mid-term corrections as the economy was likely to achieve a robust growth of nine per cent while revenue collections were buoyant and inflation well within control. In the medium term, the growth rate could even be 9.5 per cent, especially when the domestic savings rate was projected to surge to 39 per cent from 34 per cent, he said.

For this, however, Mr. Srivastava noted that apart from encouraging private investment, the Government would have to raise the level of public sector investment in infrastructure from the current four per cent of the GDP to 6-6.5 per cent. He also felt that the direct and indirect taxation system should be rationalised so as to bring down the combined Central and State taxes to about 20 per cent from the current 28.5 per cent in phases.

At the meeting, there was a general consensus that in view of the constraint on resources, the additional expenditure incurred, if any, should be restricted to only the capital-intensive sectors like education, health and infrastructure.

Some participants also called for speeding up the process of reforms in sectors such as labour, insurance and pension for larger investments in manufacturing and services.

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