Social Scientist. v 18, no. 203 (April 1990) p. 33.

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Growth Scenario for India in 2000: Persistence of Basic Problems^

The decade of the 1980s has ended on the hopeful note of India experiencing a favourable rate of economic growth. The decennial growth rate of GDP has exceeded that of the previous three decades by more than one percentage point. The performance of the industrial sector has been impressive with the annual rate of growth of industrial production, which was stuck at around 4 per cent during the 70s, increasing to 7 per cent during the 80s. The performance of the country looks even more impressive in the more recent period with the annual growth rate of production averaging 8.5 per cent between 1986 and 1989. Major infrastructure sectors such as energy and transportation registered high growth rates and the agricultural sector has been able to sustain the historical growth rate. At the same time, macro-economic demand imbalances have cropped up: the aggregate demand has expanded faster than aggregate supply and the extra demand has spilled over to the balance of payments. The public finance scenario was not so encouraging either: the resource gap in the revenue account and the budgetary deficit steadily increased and reliance on loans for financing growth also increased during the 1980s. On the basis of growth achievement, policy makers consider that a growth rate of 6 per cent is feasible during the Eighth Year Plan period.

In the long-run perspective, even if the macro-economic imbalances can be avoided through appropriate policy measures, the social consequences of the higher growth path assume much greater importance. In this context, the following questions are relevant. Will higher growth result in an increase in the demand for labour and eventually tighten the labour market by the turn of the century? Will growth per se improve the level of living of the masses to reduce the poverty level to 5 per cent by the year 2000 as envisaged in the Seventh Plan? Answers to these questions depend not merely on the quantum of growth but also on the structure of growth.

The social consequences of growth critically depend on both the location of effective demand and the level of income inequality.1 At

* Director, Centre for Economic and Social Studies, Hyderabad.

** This paper has been prepared for the South Asian Civil Service.

Social Scientist, Vol.18, No.4, April 1990

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