'Govt looking at alternate resources of investment'

Says there are many opportunities in India compared to longer term investments of three to 10 years

The Centre is working on creating more attractive instruments to provide alternative resources of investment for people than gold and housing, said Raghuram G Rajan, chief economic advisor with the Ministry of Finance, Government of India.

Rajan also said there are many opportunities in India compared to longer term investments of three to 10 years, and once things start to roll properly, a lot of things the country sees as problems would be taken care of.

"First you should bring down inflation which the Reserve Bank of India is trying very hard to tame. But also we should create more attractive instruments, which provide people an alternative resource of investment than gold or housing. We are working on those," he said, replying to a question on the present economic situation, the growth in current account deficit and the increase in gold imports.

The government started with inflation index bonds and there are equity-linked deposits which a number of banks are now peddling, not just with some minimum floor of return, but also with some potential upside.

"As the economy starts doing better, more of these instruments will look more attractive. Equities and fixed income will look more attractive as inflation comes down and that will neutralise some of the hunger for gold as an investment," he said.

He added that there would not be any decrease in the import of gold as an ornament, in fact, over time presumably people get richer and the country would import more gold; but India will have the capacity to import more at that point of time, he added.

"We have to work on fixing those problems, but I won't be overly pessimistic and say there is no fix," he added.

Delivering lecture, started to commemorate Kuruvila Jacob, the headmaster of Madras Christian College High School, Chennai, from 1931 to 1962, he said, India does not have to follow the conventional path of growth, from agriculture economy to low-skilled manufacturing, then to high-tech manufacturing and finally to service.

He added that the country could look at focusing more on service sector for its growth, but should look at increasing quality. To increase quality, there should be quality education system, including quality higher education, quality teachers training schools and quality research institutions, he added.