World Bank praises CMP

Finding "sense" in the Common Minimum Programme of the United Progressive Alliance government, the World Bank on Thursday said India could at least grow by 6 per cent over the long term, but containing fiscal deficit was important.

Taking cue from the upswings in international markets, another multilateral lending institution, Asian Development Bank, said India could achieve 7 per cent growth over the next two years if there were no "unprecedented" shocks.

"CMP makes good sense. The implementation (of CMP) is the critical issue," World Bank Country Director Michel Carter told reporters on the sidelines of a seminar jointly organised by it and ICRIER in New Delhi.

India's high growth could be the "key" underlying factor behind the regional performance, Carter said, quoting the World Bank's Global Development Finance Report 2004.

He said the 'reform with human face' showed that the UPA government attached "high emphasis" on infrastructure, especially on investments in education and public health but the problem of rising fiscal deficit could not be wished away.

"There can be no miracle to tackle fiscal deficit," he said and stressed that it has to be done either by increasing the revenue base or re-allocation of expenditure. However, he said the balancing will be known only in the Budget for 2004-05.

About the growth prospects for this fiscal in view of the 7-8 per cent growth expected by the government, Carter said he would rather take a view on a long-term basis where the "lower end growth could be 6 per cent." On the upper band, he said, it could be 7-8 per cent or even more depending on the global and domestic scenario.

Elaborating on the growth prospects for India, ADB Deputy Country Director Sudipto Mundle said if there were no major oil price hike and monsoon "shocks" in the next two years, the country could achieve 7 per cent growth and be "in sync' with upswings globally.

Carter said if the oil prices continued to rise in the long run, it could have an impact on the India's economy.

On the interest rates, which now show signs of hardening, Mundle said this aspect has to be borne in mind while framing policy in India.

About the foreign direct investment inflows into India, he said though the foreign capital inflow was as large as $35 billion, "unfortunately only a very small part of this is FDI."

World Bank Lead Economist Mansoor Dailami said after the surge in 1990s, FDI inflows were down and India could attract only $3 billion FDI compared to China's $54 billion.

However, India could garner more portfolio equity flows at $7 billion than China's $4.8 billion in 2003 and the country was the second largest recipient of overseas remittances, he said.

He said India was capable of attracting $12 billion worth FDI. The CMP had envisaged that the country could "absorb" $12-15 billion FDI, which was 2-3 times the present level.