Reported by Sandeep Pattnaik
Bhubaneswar, Jan 6:
The 14th Finance Commission will decide on the demand for a special allocation for Odisha, which has been rated as the poorest state in the country as per the Raghuram Rajan Committee report, C Rangrajan, chief economic advisor to the Prime Minister said here on Monday.
He was responding to a question on the issue at the 13th foundation day lecture held on the eve of 34th Foundation day of Nalco here.
The state had earlier demanded increase in allocation to the state from the Centre from 32 to 50 percent, when the 14th FC team headed by chairman V V Reddy was in Odisha in December last year.
He attributed factors like delayed project clearance, land acquisition issues, getting MoEF nod mostly in case of green field projects across the country, including Odisha, as the major hurdles affecting growth. “Cabinet Committee on Investment [CCI] set up by the centre is in full swing to clear several stalled projects in the Country,” he added.
Rangarajan said the pace of growth in the agriculture sector has to be enhanced from the existing 3% to 4% and consistently maintained at this level. “Using improved technology, changing the basket of agri products pari passu with the change in demand, creating more space for agricultural market in the country along with amendment to APMC Act can bring about the required growth momentum in the sector,” Rangrajan added.
India is exposed to certain immediate challenges and suffers from various medium term concerns, the former RBI Governor said.
Among the three immediate challenges that the Country faces are inflation, current account deficit (CAD) and fiscal consolidation, he said.
“Inflation, which has remained at a high rate of around 7.5% at present, is triggered by food inflation and supply bottlenecks. But demand pressure can be held equally responsible for the higher rate of inflation,” the veteran economist said adding, “high growth does not necessarily warrant high inflation and it has to be contained.”
Speaking on the second immediate challenge i.e. CAD which has touched 4.8% of Country’s GDP last year (2012-13), Rangrajan went on to add that, “The deficit can be filled up by means of more capital flows to the country through FDI route, portfolio investment from FIIs, external commercial borrowing [ECB] by Indian entities and last but not the least NRI deposits.”
“Simultaneously, import of commodities that include gold, oil and coal, the price of which affects Indian economy to a great extent by increasing the CAD level, needs to be curtailed,” said Rangarajan adding, “The Country is expecting a lower CAD of 2-2.5% of GDP this fiscal.”
Besides, fiscal deficit by way of fiscal consolidation has to be contained within 3% of GDP in a gradual manner, he said.
There are six medium term challenges before the struggling Indian economy – agricultural productivity, infrastructure development, governance, reforms, growth in equity and environmental concerns,” Rangrajan informed.
“In infra sector, power is the most vital component which needs substantial capacity addition. There is a need to create 75,000 MW of capacity in the 12th five-year plan,” Rangarajan said.
“Reforms need to be done in creating competitive markets, pricing of natural resources, containing subsidies along with focus on agri and agri marketing,” he said.
The economist stressed on improving living standards of the people of the country by providing them better health conditions, education etc. “Growth and equity should go hand in hand,” he added.
Environmental degradation and ecological deterioration should be taken care of while initiating projects but simultaneously adjustment to environment is necessary for growth, Rangarajan said.