In tangible terms, for India, the Advisory Council expects the following:

i) Investment capital to be made available at reasonable rates of interest;

ii) The Government reducing its fiscal deficit, particularly revenue deficit;

iii) The Government to provide more and better infrastructure;

iv) Investment in infrastructure by way of direct public investment or through public-private partnership.

Going forward, it projects that the net accretion to resources will slow down with slight deterioration in the current account balance, but its financing will be sharply increased from FDI flows, estimated to be $8.5 billion against the Reserve Bank’s projection of $5.7 billion, and a marked slowdown in portfolio flows from the levels achieved in the previous year. The report concludes that, in projecting a growth rate of 7.8-8 per cent, one would hope this is investment-driven and that ‘‘the growth momentum can be maintained if the Government can create a conducive climate for private investment through strong supply-side response mainly in two ways—improve the ...infrastructure and make credible fiscal adjustment so as to release resources for private investment. Some hardening of interest rates is inevitable to restrain inflation, and expect the WPI inflation to be around 5.5 per cent’’.

The prescription is somewhat at variance with the Government’s thinking in this regard at least on four contents:

First, the Eleventh Five Year Plan target of an average 8.5 per cent GDP growth may not look so unrealistic if the growth momentum of the last three years can be sustained. However, the resources for the Eleventh Plan for an 8.5 per cent increase as a percentage of the GDP are expected to be 9.43 per cent and the Gross Budgetary Support to the Plan has to increase substantially to over 5 per cent. This is not in line with the targets contained in the Fiscal Responsibility & Budget Management (FRBM) Act, and the Plan says that ‘‘this raises the issue of whether the FRBM targets should be waived further by say two years and (that) an alternative projection and profile of investment requires a modification of the Act or at least the rules on the fiscal deficit targets, not to be specified in absolute terms but to be cyclically adjusted in keeping with international best practices’’.

... contd.