Prime Minister of India - Dr. Manmohan Singh

PM's Economic Advisory Council Calls for More Public Investment in Infrastructure and Lower Fiscal Deficit

The Prime Minister's Economic Advisory Council, chaired by Dr C. Rangarajan, has forecast a near 8.0% rate of growth in 2006-07, following three years (2003-2006) of 8.1% growth. This will be the first time in history that the Indian economy would be growing at 8.0% for a continuous span of four years.

In an upbeat assessment of the economy's performance last year and prospects for next year, the EAC to PM has called for better infrastructure, more public and private investment in infrastructure, as a necessary condition for sustaining these high rates of growth. The EAC has also drawn the Government's attention to the need for "reasonable rates of interest", and for lower fiscal deficit, particularly revenue deficit.

Forecasting a 7.9% rate of growth in 2006-07, the EAC says this will come from 1.5% growth of output in agriculture, 9.7% in industry and 9.5% in services sector. The sub-sectors driving growth in fiscal 2003-06 were manufacturing, construction, communication and financial and business services.

Despite rising oil prices, due to which inflation at home has gone up from 4.1% last year to 5.5% this year, the EAC believes global growth will be sustained and that there are no significant external constraints for the expanmsion of the Indian economy.

Agriculture remains a major area of concern, partly because of its continued dependence on rainfall and partly because of stagnation of yields. The EAC says there is need for a vigorous push for new technologies, particularly for rain-fed crops, their active dissemination through extension supported by inputs, credit and rural infrastructure. Energy and other infrastructure pose the main constraint on acceleration of growth of manufacturing.