E-Paper
Core sector key to GDP growth
The pre-budget economic survey laments the slow rate of investment in infrastructure sector.
Making a case for increased private sector investment in infrastructure, the pre-budget economic survey laments the slow rate of investment in this sector.
Stating that India was far below China and East Asian countries, the survey says that improvement in infrastructure will have a strong impact on GDP growth and poverty alleviation.
The survey adds that six core sectors — power, coal, finished steel, cement, crude oil and petroleum products — registered a lower average growth of 5.4 per cent during April-December 2004.
This is marginally lower than the 5.8 per cent growth for the period in 2003. The decline was on account of a sharp fall in the growth of finished steel, it said.
Among other infrastructure sectors, goods traffic on railways (7.7 per cent), cargo handled at major sea ports (11.1 per cent); airports (18.3 per cent) and air passenger traffic (21.8 per cent) experienced higher growth ratesin April-December 2004 compared to the same period in 2003.
The survey said the government must limit its role in infrastructure services in order to remove inefficiencies. It added that the private sector should be given incentives to invest in infrastructure while preventing it from extracting monopoly rents.
“A key part of this is establishing a framework of rules and limiting arbitrary state power to give the private sector confidence,” it added. However, it warns against complete dependence on private production in an unregulated market.
“The decline in public spending in infrastructure has not been adequately compensated by private sector due to difficulties in the regulatory environment,” the survey said.
It added that there were many subtle difficulties in finding the right infrastructure policy framework. Making a special mention of the country’s booming telecom sector, the survey upheld this as a role model. It said that the expansion of broadband services is the next frontier.
* Need to shift focus from construction to corridor management and road safety.
* Ports need adequate policy framework to promote inter-port and intra-port competition.
* Civil aviation needs improvement in regulation and better airports.
* Continue to enhance energy security by augmenting trans-border gas pipeline.
* Substantial reforms required in the functioning of Indian railways.
* Focus on empowering cities, support institutional reforms, directed fiscal transfers for transition costs.
* Indian economy can absorb up to $150 billion of FDI in infrastructure sector over next decade.
* Asks state, local authorities to tap capital markets to finance schemes for development of cities.
* Water, sanitation, solid waste management would need estimated Rs 53,719 crore, shortfall of about Rs 18,000 crore.
* Survey favours repeal of Urban Land Ceiling and Regulation Act, reform of rent control laws and setting up independent regulators for urban services.
* Also suggests framing community participation law, double entry system of accounting for urban local bodies, adoption of public disclosure law, reform of property tax laws and introduction of e-governance.
