- According to a report by Crisil Research, election mandates only influence the sentiments but the policies following a decisive mandate will alone influence growth by decongesting bottlenecks, hastening reforms and speeding up investment efficiency.
- Other findings:
- An unclear mandate will stagnate growth at 5%, while even with a decisive mandate the chances of GDP surging 6.5% over the next 5 fiscals is only 50%.
- India’s Incremental Capital Output Ratio or ICOR, a measure of investment efficiency, has worsened to almost 8 in the last two fiscals from 4.4 during the high growth period of 2003-04 to 2010-11. Higher the ICOR, lower the efficiency of investment.
- A look at evolving investment dynamics says that there is a natural limit to the upside beyond 6.5% as surge in investments or improvement of efficiencies witnessed in fiscals 2004-11, which led a 9% GDP growth, is unlikely to repeat in the next 5 years.
- Consequent lost opportunities resulting from 6.5% growth:
- 2 million vehicles or sales of PVs as only 16.5 million passenger vehicles (cars, utility vehicles and vans) will be sold over the next five years if GDP growth averages 6.5 % as opposed to the 18.5 million at 9 % GDP growth.
- Steel and cement, which witnessed unprecedented increase during fiscals 2004-11 will reduce as a result of slower economy. Sales will reduce by 125 million tonnes in cement and 42 million tonnes in steel when the economy expands annually at 6.5 % instead of 9 %.
- Televisions sales will reduce by 13 million, refrigerators by 6 million, washing machines by 3 million and air-conditioners by 6 million.
- 226 million people will remain below the poverty line if growth averages 6.5 % (19.6% poverty ratio), while a 9 % growth would have reduce it further to 177 million, bringing about a sharp decline in India’s poverty ratio to 13.6 % from 22 % now.
- 15 million less non-farm jobs created, forcing many to remain locked in agriculture.
- Read at:http://www.thehindu.com/
todays-paper/tp-business/gdp- likely-to-average-65-over- next-five-years/ article5932358.ece