Country needs to emerge out of low growth phase, says Rangarajan

The chairman at Madras School of Economics says India must get maximum output out of investments to achieve growth

The country needs to overcome the low growth phase it is going through as quickly as possible and get maximum output out of the investments to achieve growth, said C Rangarajan, former chairman of Economic Advisory Council to the Prime Minister and current Chairman of Madras School of Economics.

Speaking to the auditors at a conference on Business Excellence and Internal Audit, organised by the Institute of Internal Auditors, Chennai, he said, that the country saw a lower growth than it should have seen given the investment rate level and it was due to delay in completion of projects, lack of complementary investments and third, perhaps, the inavailability of critical inputs such as power.

He added that to address such issues while going ahead, the internal auditors have an important role to play in the microlevel problems.

In 2007-08 when India's growth rate exceeded 9.5%, the investment rate of the economy was 38% of the GDP. With an incremental capital output ratio of 4:1, should give a growth rate of 9.5%. Since then, the investment rate has fallen. But it has fallen from 38% to 30% and given an incremental capital output ratio of 4:1, it should have given the country a growth rate of 7.5%.

"But the actual growth rate turned out to be less than 5%. Why? That is because we are not getting enough or adequate yield out of the investment we are making. This is happening because of three reasons. The delay in completion of projects, lack of complementary investments and third, perhaps, the inavailability of critical inputs such as power," he said.

"As we go ahead, we need to address these issues. There are policy issues involved, in terms of environmental concerns, land acquisition and so on. We need to resolve them. There are also microlevel problems, at the entity level, which need to be addressed. That is where the internal audit also comes in," he added.

The Indian economy is currently passing through a phase of low growth. But this should not cloud the fact that over the decade beginning 2003-04, the average rate of the growth of Indian economy has been a little over 7% per annum. "Nor should we overlook the fundamental changes that occured in Indian economy. The Indian economy today is more resilient and more competitive," he said.