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Friday, February 25, 2011

'Reform education sector to reap demographic dividend'

The pre-budget Economic Survey today called for more reforms and bold decisions in education sector, including smooth implementation of the Right to Education Act, to make the most of India's young population for economic growth.

"Reaping the demographic dividend needs a vision, a long-term plan, and bold decisions," the Economic Survey for 2010-11 tabled in Parliament said.

It said that given the advantage of a young population, the realisation of the demographic dividend is another factor that calls for reforms in the education and health sector.

The RTE Act "must face no implementation deficit for it to work towards realising the demographic dividend," it said.

The RTE Act makes it mandatory for every child in the 6-14 age group to get at least eight years of elementary education.

The pre-budget document also said that reforms are needed for universities and in higher education and the demand-supply mismatch in the job-market needs to be corrected.

While recognising that mobilisation of funds for higher education is a challenge for the government, the Survey suggested that the gap could possibly be met by tailor-made public-private partnership mode.

On the National Skill Development Mission, it said that much more is required both in terms of achievements and speed.

The National Skill Development Corporation (NSDC), set up in July 2008, has been mandated to achieve the target of creation of skilled workforce of 150 million people by 2022. By the end of December 2010, 28 states and union territories had set up Skill Development Mission.

India has the advantage of demographic dividend, with over 50 per cent of its population below 25 years of age, whereas many advanced economies, including Japan, are facing the problem of an ageing workforce.

On the UPA government's flagship Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), it said though it is has been instrumental in creating job opportunities, more needs to be done.

"Further improvements in the schemes like shifting to permanent asset building...Better monitoring, and extension of MGNREGS to urban areas can yield better results," it added.

The Survey further noted that creating proper balance between climate issues and maintaining growth is another challenge for the government.

"Careful planning and customised policies are needed to ensure that the green growth strategies do not result in a slow growth strategy," it said.

The Survey also called for reforms in the health sector as demand for the services is likely to rise considerably in the future as a result of better level of education, income and urbanisation.

India, the Survey said, needs a policy to bring another round of multifaceted reforms for the industrial sector to have a sustained double-digit output growth in the medium to long term.

In the short-term, the sector is likely to grow at moderate but sustainable rate. However, increasing cost of financing and slowdown in foreign equity inflows in the current financial year are causes for concern.

"Over the medium to long term, to sustain double-digits output growth and reduce the vulnerabilities of the sector, there is a need to put in place a policy framework for embarking on another round of multifaceted reforms," it said.

It also pitched for giving banking licences to industrial houses wanting to set up banks to promote the goal of financial inclusion.

"As regards allowing industrial houses, business houses and NBFCs to promote banks, they may be allowed full banking license with provision for avoiding conflict of interest issues," it said.

On India's exports, it said that shipments will surpass the USD 200 billion target for the current fiscal and the gradual roll-back of stimulus measures is not likely to impact growth of the country's overseas shipments.

On insurance, it said that there will be different set of norms for life and non-life insurance companies for coming out with a public float.

"It is proposed that the disclosure requirements for life and non-life companies would be separately mandated given the nature of their respective business," the Survey said.

It added that investors would be required to be made aware of the financial performance, company profile, financial position, risk exposure, corporate governance and management of these companies.

To contain excessive flow of foreign capital, it said that India should work closely with G-20 countries to take collective steps.

"We will have to keep open the options of having to take corrective measures, should these flows affect us adversely. The most important step in this context is to work with the G-20 countries and try to figure out collective decision rules, whereby each country tries to intervene minimally in the flow of capital," the Pre-Budget Survey said.

It further said, "when it does intervene, it does so taking into account the externalities on other nations."

The continuing debt turmoil in the euro zone area could have an adverse fallout on the Indian economy, hurting its capital flows as well as exports, it added.

The Economic Survey pegged the fiscal deficit for 2010-11 at 4.8 per cent, lower than the Budgetary estimates of 5.5 per cent, on the back of higher realisation from 3G spectrum auction and buoyancy in revenues.

India's fiscal deficit had ballooned to 6.3 per cent of the GDP in 2009-10 in view of stimulus spending worth billions of dollars to combat global financial meltdown, and was pegged at 5.5 per cent for the current fiscal.

Calling for bold reforms in the power sector, the Economic Survey asked the states to reduce subsidies and cross-subsidies on electricity and hike tariffs.

India currently has one of the lowest and most uneconomical average electricity tariffs in the world -- 8 cents per unit at the retail level, compared to about 12-15 cents in countries endowed with more coal or gas and 19-10 cents per unit elsewhere, it said.

On agriculture, it said that special efforts are required to promote production and productivity of all coarse cereals to ensure food and nutritional security of India.

"There is every reason to promote the production of coarse cereals particularly in the rain-fed areas by increasing investment in research and the schemes," the Survey tabled in Parliament by Pranab Mukherjee said.

Further it warned that India, despite being the world's largest producer, could become a net importer of milk in next decade if the growth in the sector is not accelerated to 5.5 per cent annually.

The report said the country has not been able to keep pace with the domestic demand for milk which is growing at about 6 million tonnes annually.

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