Worsening structural constraints led to sub-5% growth: Eco Survey 2014

NEW DELHI: Worsening structural constraints like "ill-targetted" subsidies and a low manufacturing base, are among reasons that dragged down economic growth rate to sub-5 per cent level, the Economic Survey said today.

"The accentuation of structural constraints has been one of the factors contributing to sub-5 per cent growth without a commensurate large decline in investment rate," said the Survey for 2013-14, presented in the Parliament by Finance Minister Arun Jaitley.

Listing out the constrains that affected businesses, the pre-Budget document said: "Difficulties in taking quick decisions on project proposals have affected the ease of doing business. This has resulted in considerable project delays and insufficient complementary investments."

"Ill-targeted subsidies cramped fiscal space for public investment and distorted the allocation of resources," it added.

A low manufacturing base, especially of capital goods and low value addition in manufacturing, the Survey said, suggesting that manufacturing growth and exports could be facilitated with simplified procedures, easy credit and reduced transaction cost.

"Presence of a large informal sector and inadequate labour absorption in the formal sector. Absence of required skills is considered an important reason," it added.

Sustaining the high economic growth is difficult without a robust agricultural growth and low agricultural productivity is hampering this, the Survey said.

"Structural factors engendering continued high food inflation need to be tackled. Issues related to significant presence of intermediaries in the different tiers of marketing, shortage of storage and processing infrastructure, inter-state movement of agricultural produce, etc. need to be addressed," the Survey stated.