Hyderabad: The government will have to take corrective measures to maintain healthy balance of payment in order to achieve the economic growth targets of the 12th Plan period (2012-17), President Pranab Mukherjee said today.
"I do feel that it is correct decision that to have little ambitious target around 8 percent GDP growth ... would feasible," Mukherjee said while addressing at a function here. "But we shall have to keep in mind that the balance of payment (BoP) crisis can assume larger (proportion) if correct measures are not taken now. Planning commission and finance ministry will have to address these issues," he said.
The President said gross capital formation was projected at 37 percent of the GDP in the 12th Plan and it was projected that 35.1 percent would be from gross domestic savings and external support would be 2.9 percent.
"If our domestic rate of savings come down from 35.1 percent, the implication would be our external support will have to increase from 2.9 to 3 percent and 3.5 percent. That means our balance of payment crisis would aggravate which we cannot afford. And one of the major reasons of balance of payment crisis is high volatility of currency," he said.
India will have to find out an innovative solution to address problems such as energy, food and health securities besides right to education, Mukherjee said. "We shall have to keep in mind in democratic set up if we cannot provide these to the people it would lead to social unrest. And that will have serious repercussions."
On the manufacturing sector, Mukherjee said the sector growth has come down to 2.5 percent which will have serious implications. "And manufacturing sector growth will have to be ensured. Then India's economy will have a balanced growth development. The sector will have to achieve 25 percent of GDP that will provide jobs that will provide employment. That will give resources." The President said there has to be political consensus to implement economic reforms.
"We shall have to come out of our mind set. And it happened in the case of replacement of sales tax by VAT. I believe that the GST will also provide support to centre to states to industry to business to transfer of goods and services.
"These reforms from not by one party or two parties but by the political establishments as a whole. Economic development requires abroad consensus. And I do feel that economic development can take place if we have rapid growth if we have moderate rate of inflation," he said.
The President said India is passing through crisis as many other developed or developing market economies are going through and it will have to take measures keeping in mind the global situations.
"Globalisation is bound to exist. It is real. If that happens it is imperative for all of us to recognise the fact that outside development will influence our development our growth and our availability of goods and service and whole range of economic activities."
He said India has the advantage of demographic dividend and by 2030 the country will have the largest young population with 50 percent of population in the age group of 25 years. He however, said this can have adverse impact if the youth is not provided with employable skills now.