New Delhi: The UPA Govt on Tuesday raised concerns about possible overheating of the economy and said maintaining macroeconomic stability was key to promoting investment and growth, despite being upbeat about the 9.1 per cent GDP growth in the first half of this fiscal.
"Indeed there is need for continuous caution in maintaining macroeconomic stability to support the pick up in investment and growth on an enduring basis. This is particularly so in the current conjuncture with large global macroeconomic imbalances and uncertainty in currency markets," the Mid-Year Review of the Indian economy said.
Helped by a resurgent industry, which grew by 10.9 per cent, and the vibrant services sector that expanded by 10.7 per cent, the economy showed robust momentum – with GDP growing at 9.1 per cent in the April-September period.
But the performance of agricultural sector was disappointing, which grew by only 2.6 per cent in the first six months of current financial year.
Commenting on the disappointing performance of the agricultural sector, the review said the minimum support price (MSP) mechanism has not delivered the desired results and failed to discover the market price.
"There is a need for a clear separation of price support to farmers and procurement by the states on the one hand and subsidy to the poor citizens on the other", the review said in the context of deficiency in MSP mechanism.
The review carried out by the Ministry of Finance also reiterated the need for reforms in the labour legislation and regulatory framework in different sectors, particularly mining.
The review said that the regulatory reforms of the mining sector continued to remain an unfinished agenda.
It said the huge amount of investment required for funding infrastructure projects is to be raised through a combination of public investment, public-private partnership and exclusive private investments.
The review said the subsidies have often failed to reach the beneficiaries due to poor delivery. "The issue of subsidies and how they are delivered should be revisited", it added.
It talked about some of the international best practices for delivery of subsidy such as food stamps and smart cards.
It indicated a possible partnership between Centre and states in implementing some of these ideas on a pilot basis.
Commenting on the debate whether the Indian economy is getting overheated, the review stated that though the combination of high economic growth and slow creeping up of inflation in manufactured products has "generated" some concerns, there was no cause for alarm in regard to crucial parameters.
It called for rapid movements with regard to principle of "user pays" to promote investment in the weak infrastructure sector.
Pegging the investment need at $320 billion in infrastructure during the 11th Five Year Plan, the review expressed concern over problems of shortages of electricity and water supply.
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