Transformation is clearly happening

Updated: Feb 29 2008, 05:13am hrs
After wrapping up the Economic Survey, it was a relaxed Arvind Virmani that occupied the North Block office on Thursday. Confident of the economy sustaining 9% growth in the 11th Five-Year Plan period, the chief economic advisor to the finance ministry discussed a wide range of issues with FEs Subhomoy Bhattacharjee & Sunny Verma on the eve of the Budget presentation. Excerpts:

The Survey paints a very unusual picture of the Indian economy: a surplus capital and a scarcity of labour

You picked a good way of looking at [the Survey]. That wasnt the intention of presenting it, but you are right, that is the contrast, which is very clear.

Are we reaching a structural plateau in the agriculture sector, or is it constrained due to the lack of reforms

Lets start with the international environment, which says agricultureat least for a few years, globallyis going to be much more important. So, in some ways, if you look at inflation, thats a bit of a problem because you dont have the option of meeting your shortfall internationally because that is going to be very costly. On the other hand, there is even greater opportunity for Indian agriculture. If it could make a jump, it could contribute not only to the domestic economy but also globally.

Is the slowdown in most sectors mainly a supply-side issue

We have not perhaps been successful in clarifying that the average 9% growth was more like catching up to a rising trend.

The [11th Five-Year] Plan, considering all these things, set the growth rate at a 9% average. So, [8.7% GDP growth for 2007-08] is not a slowdown in that context.

Compared to the last year, it may look like slowdown, but what I tried to emphasise is that this is just coming back to a proper, sustainable trend.

Will there be any headroom for foreign investment, as per capita incomes and savings are expected to rise

Lets come back to the original point. The constraint is no longer of capital. So, savings are not an immediate concern.

Its to make sure that investments remain. Thats where the point of consumption being a little weak does become an issue.

Will the increased consumption basket move away from foodgrains

We couldnt get official data and so couldnt include it in the Survey.

Are you happy with the sectoral allocation of investment

Thats another extra chapter we have added in the Survey. The investment in the manufacturing sector is phenomenal (33% per year). I think transformation is clearly happening.