Roberto Zagha, World Bank country director in India, who has closely watched India usher in reforms in the '90's, expects them to get bolder. Zagha says double-digit growth may be feasible with some small steps. Excerpts from the interview:
Will India now remain in this 6%-7.5% growth bracket?
The Planning Commission and the prime minister have said several times that India can grow by 10%. I think this is feasible. India has a savings rate in excess of 33%, and a high investment rate. So, with the right policies, it could grow significantly.
India has an abnormally small manufacturing sector, but a highly diversified and competitive one. If you look at Bihar and Orissa, agriculture has huge potential. You need roads, water and better farm infrastructure to realise that potential. Low inflation, a sophisticated financial system and a competent bureaucracy are the other important assets. Coal is an interesting story. During 2003-05, several captive licences were given, but today there is shortage of coal in the country. If captive mines are allowed to sell in the domestic market, you could have a boost in coal production and also in power.
So there is an inherent dynamics that can be easily unleashed. Whether the growth is 7.5% or more, it would depend on how these issues are dealt with. In India there are easy gains if they go after those low hanging fruits.
Analysts say growth has fallen prey to policy paralysis?
To begin with, 7.5% growth is not bad. With 7.5% growth you can more than double your GDP in 10 years. In some respects, I find it extraordinary that India is considering 7% growth as bad. In 1995, 5% was wonderful and 6% was like a mirage. China is also growing at a slower pace. Can you say that they have also lost it?
Structural challenges that you face are not easy technically or politically. China was growing so fast that its trade surplus reached 10% of GDP. It was unbalancing the world economy. China has corrected that. It has brought down its trade surplus. But to do that, it had to increase consumption, and inevitably growth seems to be suffering. Coal in India happens to be in forests, so they have a value. There are people living around... tribals. The challenge is to ensure that everybody sees a gain in the growth, and that is not easy.