Tackling food inflation must to spur economic growth

Ill-targeted subsidies cramp the fiscal space for public investment and distort complementary investments

Slow decision making, low agricultural productivity, ‘ill-targeted subsidies’ and low manufacturing base, especially of capital goods, have all contributed to India’s growth slump, the economic survey 2013-14 points out.

The accentuating impact of these domestic ‘structural factors’ has been one of the contributors to the sub-5 per cent growth without bringing about a corresponding decline in the investment rate, the survey says.

Slow decision making with regard to project proposals, the survey points out, has affected the ease of doing business in India.

“This has resulted in considerable project delays and insufficient complementary investments,” it says.

It further blames ‘ill-targeted’ subsidies for ‘cramping the fiscal space’ for public investment and distorting complementary investments.

Other factors impinging on growth include low manufacturing base (particularly in capital goods), coupled with low value addition in manufacturing and a large informal sector with inadequate labour absorption in the formal sector owing to lack of skilled manpower.

“Sustaining high economic growth is difficult without robust agricultural growth. Low agricultural productivity is hampering this,” the survey points out.

Finally, the survey advises tackling high food inflation to ensure continued economic growth.

“Presence of intermediaries in the different tiers of marketing, shortage of storage and processing infrastructure, inter-state movement of agricultural produce etc need to be addresses,” it says.