It is a good time to be in charge of mapping out India’s economic development. GDP growth is soaring and the 11th Five-Year Plan, which began in 2007, places a renewed focus on those sectors that will put the country on course for further economic expansion. Dr Montek Singh Ahluwalia, vice chairman of India’s Planning Commission, talked to CHINA ECONOMIC REVIEW about how the government will keep things ticking over.
Q: What areas does the government want to focus on in year two of the current five-year-plan?
A: The areas that we want to focus on are agriculture and infrastructure development, plus education and health. These are the major concerns for the government. There is going to be a significant increase in expenditure on agriculture, health and education and so a lot of direct government involvement. With infrastructure, it’s not so much the government’s budget, but there are public-sector firms doing a lot of investment as well as efforts being made to bring in private investment. The nature of the attention required is different in each sector but but they are all equally important.
Q: There is a high level of public ownership in India. Is this a hurdle to growth?
A: I feel that in many countries infrastructure is largely done in the public sector, so at this stage of development, it’s not surprising. As far as the rest of the economy is concerned, while there are public sector enterprises in many areas, these areas are also open to private investment. Wherever the private sector has a comparative advantage, this will be reflected in its market share.
Q: What is the government’s role in liberalizing the economy?
A: I think it is increasingly that of a referee, except in certain sectors like health and education where the government must have a significant role. In certain kinds of infrastructure like railways and power, the government also expects to have a big role.
Q: India’s economic relationship with China is growing fast. Do you expect it to continue growing?
A: As long as the two economies remain open, which both governments want them to, and as long as their actual size suggests there are business opportunities, there is no reason to think that the scale of interdependence won’t expand further.Trade patterns should be determined by comparative advantage and we don’t expect the pattern to change dramatically in the next 10 years.
Q: Are there any major pitfalls in the India-China relationship?
A: The only issue that really provides a potential for difference is the boundary question, and they are negotiating on that. China successfully has divorced its trade from politics in the context of other countries, and I imagine much the same can hold in India.
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