Column : Reviving the growth momentum
The Planning Commission, after considering the global and domestic constraints, has revised the 12th Plan growth target downwards to 8%. However, even this lower growth target will require considerable policy initiatives to enhance economy’s growth potential. Given that the economy is likely to register less than 6% growth in the current year and both domestic and international environment may not permit a growth rate more than 7% next year, the remaining three years of the plan will have to register more than 9% growth. This would require a repeat of the 2005-08 performance, when Indian economy grew at more than 9%. With the savings and investment rates relative to GDP reaching 36.8% and 38%, respectively, in 2007-08, the growth potential of the economy expanded considerably. The consolidated fiscal and current account deficits were contained at 4.65% and 1.8%, respectively, which were the lowest in recent times. In the prevailing domestic and global situation, achieving an average growth rate higher than 9% for three years will be a major challenge and this would require significant reform initiatives.
What will be the drivers to enhance the growth potential? The answer to this lies in understanding the factors that caused deceleration in Indian economy after 2007-08 and these include both international economic environment and domestic factors. While the global financial crisis in the aftermath of the Lehman episode in September 2008 eventually impacted the
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