India’s economic survey projects 8.70 % growth rate

The Economic Survey tabled today at the Parliament by the Finance Minister of India states that the Indian economy will grow at 8.7% in 2007-08, compared to 9.6% in the previous fiscal year. The Survey, a report on the state of India's economy with suggested policy prescriptions in areas ranging from government finances to external trade, was tabled today in Parliament. The survey highlighted a slew of other challenges facing India to put it on track to higher growth. It added that new roads are urgently needed to help ease transport bottlenecks seen as a big impediment to growth, it said. There is also a major need to boost crop productivity to help contain food prices, the survey said. Farm growth in the current year is seen falling to 2.6 percent from 3.8 percent the previous year. The farm sector is crucial as it provides a living for two-thirds of India's population.

Press Information Bureau, a Government of India press release states that if India can get the skill development act right, the country will be harnessing a “demographic dividend”. It adds -

In India the “demographic dividend” which manifests in the proportion of working age group of 15-64 years will be increasing steadily from 62.9 per cent in 2006 to 68.4 per cent in 2026. For actual tapping of the “demographic dividend”, it is necessary not only to ensure proper health care but also a major emphasis on skill development and encouragement of labour intensive industries. The projected decline in the dependency ratio (ratio of dependents to the working age population) from 0.8 in 1991 to 0.73 in 2001 is expected to further decline sharply to 0.59 by 2011. This decline sharply contrasts with the demographic trend in the industrialized countries and also in China, where the dependency ratio is rising. Low dependency ratio gives India a comparative cost advantage and a progressively lower dependency ratio will result in improving competitiveness.

The Survey says that a thrust is required on creating a pool of skilled persons in appropriate numbers with adequate skills in line with the requirements of the ultimate users such as the industry, trade and service sectors. Such an effort is necessary to support the employment expansion envisaged as a result of inclusive growth including in particular, the shift of surplus labour from agriculture. However, the Survey cautions that if skills are not adequately created India could well be facing a “demographic nightmare.”