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Growth? 25% GDP needed as investment

June 21, 2005 14:32 IST
The government on Tuesday said it required investment to the tune of 24-25 per cent of GDP each year to sustain economic growth rate at six per cent and said this was possible through external borrowings as domestic savings rate already stood at 23 per cent.

"As things stand at present, a sustained growth rate of six per cent per annum would require investment to be of the order of 24-25 per cent of GDP each year," Minister of State for Planning M V Rajasekharan said at an international seminar organised by the Foundation of Indian Industry and Economists in New Delhi.

On the linkage between economic growth rate and external financing, he said, "If domestic savings is below this level of investment, the difference has to be met through external resources".

Since the national savings rate is about 23 per cent of GDP, he said, "This implies an inflow requirement of external resources of about 1-2 per cent of GDP annually".

He said such magnitude of external resources inflow could be managed without too much difficulty through external borrowings, without taking recourse to foreign investment.

Rajasekharan, however, asked whether we can be satisfied with rates of growth of around six per cent.

He maintained that one implication of such a growth rate is that it would take the economy 15 years to double per capita real income from its existing low level. This level of growth rate is even unacceptable at the backdrop of existing backlog of unemployment, he added.

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