He was speaking at a seminar on the state of the economy organised by the Confederation of India Industry (CII) and the NCAER. The reservation policy is the primary cause for slow export growth, he said.

Because of this policy, India remains competitive only in low-tech goods, cannot build cash cows and brands, is unable to upgrade technology, and competes only on price, the noted economist said.

He also urged the government to tackle the issue of user charges for infrastructural and public services. This will help us achieve desired levels of private and public investment in infrastructure, Mohan said.

"Indian business does not appear to be successfully competing in the international market," said Gail Fosler, vice-president and chief economist, The ConferenceBoard. Instead, it is "slipping behind," despite the fact that the global economy is recovering.

The business environment in India restricts growth, she said. Indian companies find it difficult to go to overseas markets because of the "exchange controls and other regulations".

She also presented the results of a study on the US manufacturing sector, which indicate that computer-using industries have acquired a remarkable edge over the non-computer using ones in terms of productivity.

During 1960-73, productivity in computer-using industries was lower than that of non-computer using ones. During 1973-79, the productivity differential increased, but since 1979, the trend has reversed. Since 1979, productivity in the computer-using industries has been double than that of the non-users.

Presenting the findings of another study, Fosler pointed out that costs and productivity are, to a large extent, size-neutral.

Her conclusion was that India is losing valuable time. "Market reform is the key to businesssuccess."

However, Shankar N Acharya, chief economic adviser to the ministry of finance, did not share Fosler's pessimism. He pointed out that during 1950-80, the per capita growth was roughly 1 per cent. "In the eighties, it was 3.5 per cent, and in the nineties, 4.5 per cent."

While appreciating Fosler's observation regarding size neutrality, he said that the situation may be different in India, as small scale in large scale in India.

"In the post 1991-92 era, there have been clear gains in productivity," Acharya said.

The Planning Commission has started the process of trying to assess the competitiveness of the Indian industry in a broader framework, but it is yet hit upon a satisfactory methodology for doing so, commission deputy chairman KC Pant said.

"The development of the statistical system in India has been basically to cater to the information needs of the government," Pant said. However, the market also requires data "across a wide array of variables and with much greater frequency thanthat we have been accustomed to."

He pointed out that reorienting the statistical system to meet these requirements will be a protracted process. The market require future projections and most private sector companies in India do not have the expertise to make future forecasts.

"Until quite recently, and even today to some extent, the main source of such projections were those by the Planning Commission," the plan panel chief said, "However, since the Planning Commission projections were done mainly for its own purposes, these forecasts were made for the medium term with little emphasis on short run variations. In the absence of anything better, the private sector had to make do with this information and carry out whatever adjustments they could with the information available with them."

He also congratulated the NCAER and other institutes "in taking the initiative to bringing out their estimates of the current state of the economy and its likely progress in the immediate future."

Pant pointed outthat though the country has made considerable progress during the first wave of economic reforms, a lot more remains to be done in order to face challenges and take advantage of opportunities in the global competitive environment.

Pant said that it is becoming increasingly clear that many of the elements of the second wave of reforms would have to be on the issues which were in the domain of the states.

The Centre has already embarked upon an experiment of entering into MoUs with state governments, whereby some component of central assistance is made contingent upon the states undertaking certain critical policy reforms, Pant said.

CII president Rahul Bajaj said industry needs a conducive environment for growth. He emphasised upon infrastructural development, further liberalisation in the insurance sector, privatisation, labour policy with a human face, less discretion and more transparency.