CAN INDIA SUSTAIN ITS ECONOMIC PROGRESS?

One of the important indicators of the Indian economic boom is the growth in the Gross Domestic Product (GDP) increasing to over 9% during 2005-06. But, the question is can we sustain this growth? Whether the growth is based on sound fundamentals? What fraction of the population is involved and is benefited by this growth rate?

The major contributors for the growth are reported to be: sustained industrial manufacturing activity and impressive performance of the service sector, particularly the IT services. The largest source of government revenue comes from the service sector (50%), Industry (25%) and agriculture (23%). Banking and financial sector grew at the rate of about 15% per year since 1991.

Over the last three decades, there is continuous growth in service sector, stagnancy prevailed in industrial sector and the share from agriculture is declining! It is true that the telecom revolution is benefiting a wide spectrum of people and is far reaching. India’s total tele-subscriber base is touching 200 million-mark (population around 1100 million). Mobile phone connections are growing at the rate of 6 millions/month and soon going to add up to 500 million. One can see color television sets in almost every urban household. This figures show wide-spread participation of people in the “feel good” prosperity scenario. Quite impressive indeed!

However, can the IT sector alone sustain the growth in the economy? No, not for ever. India needs to concentrate on industrial growth, producing raw materials, chemicals, textiles, etc, etc. Every day, media report government clearances given to close down textile mills, small scale chemical industries, metallurgical industries to make way for residential towers and malls. Agriculture scenario is stagnant. Rural agriculture workers are migrating to urban areas for greener pastures. A real growth of the order of 15% GDP may be possible if the above sectors and the necessary infrastructure development are also nurtured by the government to make India the economic super power.