Why growth is constrained

Reforms to facilitate private investment and savings will need to be supported by complementary government investments in physical and social infrastructure. However, the financing of infrastructure, education, health, etc. will require significantly large resources. Unfortunately, our resource-generation record has been too abysmal to fund such spending. We have one of the lowest tax-to-GDP ratios and even among developing countries we rank at the bottom in terms of the proportion of population registered as taxp ayers - less than five per cent of household population.

Moreover, these limited resources are deployed on the basis of skewed priorities (for example on roads whereas the major constraint to growth is availability of energy at affordable prices). And the issue here is not just the creation of more assets - schools, hospitals, etc. but ensuring that there are adequate budgetary allocations for doctors, nurses, teachers and medicines, etc to keep these facilities functional, and provide decent services.

Future economic growth will also face a slowing down of demand in our traditional export markets of Europe and the US, who are struggling with their own problems. To overcome this demand insufficiency for our products, we will have to look towards the East, especially our neighbours, with young consumers and growing markets, as opposed to aging populations and contracting Western markets. It is not quite clear how well prepared any of the political parties is to address these challenges.