Integrity Score 240
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The Strategy for Economic Reform in a Globalised World continues....
That means that in the next three years the growth rate has to rise from the current 7% to 10%, and then be sustained at that level for
the subsequent ten years.
Thereafter till 2020, the economy should be sustained at 7 per cent annual growth rate in GDP. Technically, this requires a rate of investment of 30 per cent of GDP (up from 24%) and an incremental capital-output ratio (ICOR) of 3.0 (down from 4.5). The rate of investment can be raised by either the domestic saving rate (presently 22%) or foreign investment (2% currently) or both. ICOR can be reduced only by decreasing the inefficiency in the current allocation of capital and by raising total productivity. These require new reforms to solve the problems of: (i) Financial Debt-Trap (ii) Budget Strait jacket (iii) Crowding out private investment by Government borrowing from banks (iv) De-regulation at State and local levels (v) Poor Infrastructure: power & roads (vi) High transaction costs of corruption and delays.
What kind of reforms are required? Reforms have not only to improve efficiency, but also must motivate the people and integrate local markets nationally and national market globally. Such reforms would generate employment for the masses, and hence create commitment of voters for more reforms.
The main reform areas are therefore as indicated in the following charts: