Economics India

Tuesday, January 31, 2006

India's Economic Growth in 2005-06 Likely At 7.5%

This is what India’s Finance Minister Chidambaram indicated yesterday. He attributed this high rate of growth to peoples’ realization that hard work and efficiency alone will take them to prosperity! The change in the earlier estimate of growth rate at 6.9% however came about primarily due to the change in the base year from 1993-94 to 1999-00.

Mr. Chidambaram recognized that rising international prices for oil was a problem but in the interest of price stability, government would not pass on the full burden of rising oil prices to consumers. While commending RBI for doing an excellent job of containing inflation to about 5 to 5.5%, Mr. Chidambaram emphasized the importance of prudent fiscal polices.

To sustain this growth rate, Mr. Chidambaram wants more investment in roads, air and sea ports and railways and cooperation from trade unions in their implementation. In earlier posts, we noted the importance of increasing the savings rate in the economy, attracting FDIs through the medium of public-private partnerships, and reducing (or increasing efficiency of) public expenditures by reducing waste and untargetted subsidies within the limits of well-defined social safety nets. It may also become necessary to inject a "larger dose of prudence" in state governments' fiscal policies.

Mr. Chidambaram hopes to address some of these questions in the forthcoming issue of the Economic Survey and the Budget for 2006-07. We are looking forward to these documents and do more detailed work on individual topics.


  • Excuse me, I'm currently studying a master degree in development and I'm taking a class of Political Economy. I was wondering if you could advice me on where I can read about India's economy, how it has grown, etc. since it's one of the major topics in my university. Thank you very much.

    By Anonymous Anonymous, at 7:41 PM  

  • To,


    You may like to read the following books on India:

    1. India and the Politics of Developing Countries: Essays in Memory of Myron
    Weiner edited by Ashutosh Varshney, Sage Publications 2004
    2. India in the Era of Economic Reforms edited by Ashutosh Varshney, Jeff Sachs
    and N. Bajpai, Oxford University Press, 1999
    3. India and China: An Essay in Comparative Political Economy by Meghnad Desai
    in India's and China's Recent Experience with Reform and Growth, edited by
    Tseng and David Cowen. IMF 2005

    from, Another Anynymous

    By Anonymous Anonymous, at 5:32 PM  

  • Thank you very very much.

    By Anonymous Daniel Núñez (formally known as anonymous), at 5:50 PM  

  • Dear Dr. Deshpande:

    I entirely agree with your tone regarding Mr. Chidambaran's complaint about the capital flows to China. One should just visit any airport in China or a railway station and see how orderly things are as opposed to the mess always created by the socialists and communist intellectuals (mostly trained oversees, and mostly coming from the disgruntled high cast families) in India.

    How could India attract capital when these intellectuals refuse to see the well functioning communist China? In fact I am surprised to read that the airport strikes can occur in this century in India. Why to wait for the Budget Speech?

    By Anonymous Anonymous, at 2:26 PM  

  • I agree with the Anonymous. As one commentator on CNBC recently said India is at least 20 years behind China in terms of creating necessary infrastructure, policies and attitudes to attract FDI in a big way. This is a big topic for discussion which we should get to before long. Thanks for your comment.

    By Blogger Ramesh G. Deshpande, at 8:30 PM  

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