INDIA NEEDS MORE REFORMS FOR 10% GROWTH RATE, SAYS OECD

The easing of foreign investment restrictions in the Indian financial services sector is just one of several recommendations from the Organisation for Economic Co-operation & Development (OECD) in its first economic survey of India. The report, published yesterday in Delhi, stated that if India wanted to achieve 10% annual growth rates by 2011, it would also need to implement labour law reforms, resume the privatisation of public sector undertakings and drastically improve the country’s creaking infrastructure. OECD secretary general Angel Gurria said that “if I was asked to suggest one thing, I would suggest labour market reforms”. The report noted that the organised job sector in India actually shrunk by 1% a year between 1997 and 2004, while the unorganised sector grew at an annual rate of 8%. The harsh analysis was met with intransigence from Indian politicians. G Devarjan of the All India Forward Bloc said that “we reject most of what the OECD has said. By following its prescriptions, India would end up abandoning the concept of a welfare state altogether”. Santosh Bagrodia, a member of the ruling Congress party and chairman of the parliamentary standing committee on industry, said that “I don’t believe labour reforms are so serious an issue. We already have freedom of operation in most sectors”. India has averaged growth of 8.6% a year over the past four years and now accounts for nearly 7% of global gross domestic product.