question_answer

Direction: Read the passage carefully and answer the questions given below it. Certain words/phrases are given in bold to help you locate them while answering some of the questions.

The question before the new government is whether the statistically undeniable economic slide of the last decade can be halted and a fresh impetus be given to growth in the Indian economy.

The answer is "yes" if good governance norms are properly enforced to enable the Indian economy to grow at 12 per cent per year in GDP for a decade, which means efficiently deploying resources to reduce the current incremental capital output ratio from 4.0 to 3.0, and by incentivizing the people to save more to increase the current rate of investment (which is domestic saving plus net foreign investment).

The United Progressive Alliance (UPA) government, judged statistically by the dangerous level of fiscal and capital accounts deficit indicators, has squandered national financial and physical resources mainly due to a lack of accountability, corruption and high transaction costs arising for archaic bureaucratic procedures.

Efficient, corruption-free deployment of existing resources that implies a reduction in the capital-output ratio, means a 12 per cent GDP growth rate per year, i.e., a doubling of GDP every six years, and that of per capita income doubling every seven years.

This growth rate over a five-year period can take us into the league of the top three most populated nations of the world, ie of the United States, China and India - that is by 2020. Thereafter, India would be able to overtake China over the next decade. That should be the goal of governance for us today

India is not yet an economically developed nation. India has demonstrated its prowess in the IT, biotech and pharmaceutical sectors and has accelerated its growth rate to nine per cent per year in the first decade of this century, up from an earlier 40-year (1950-90) socialist era average annual growth rate of a mere 3.5 per cent, to become the third largest nation in terms of GDP at Purchasing Power Parity (PPP) rates.

However, it still has a backward agricultural sector of 62 per cent of the people, where there are farmer suicides because of inability to repay loans. There is a national unemployment rate that is of over 15 per cent of the adult labour force, a prevalence of child labour arising out of nearly 50 per cent of children not making it to school beyond standard five, a deeply malfunctioning primary and secondary educational system, and 300 million illiterates and 250 million people in dire poverty.

India's infrastructure is pathetic, with frequent electric power breakdowns even in metropolitan cities, dangerously unhealthy water supply in urban areas, a galloping rate of HIV infection, and gaping potholes that dot our national highways.

To become a developed country, therefore, India's GDP will have to grow at 12 per cent per year for at least a, decade. Technically this is within India's reach, since it would require the rate of investment to rise from the present 28 per cent of GDP to 36 per cent, while productivity growth will have to ensure that the incremental-capital output ratio declines from the present 4.0 to 3.0.

These are modest goals that can be attained by an efficient decision-making structure, tackling corruption, increased Foreign direct investment (FDI) and use of IT software in the domestic industry. But for that to happen, what is required is more vigorous market-centric economic reforms to dismantle the remaining vestiges of the Soviet model in Indian planning, especially at the provincial level.

The Indian financial system also suffers from a hangover of cronyism and corruption which has left government budgets on the verge of bankruptcy. This too needs fixing. It cannot be rectified by a Reserve Bank of India vitiating the investment climate with an obsession to contain inflationary pressure. It is like killing a patient to lower his body temperature.

India's infrastructure requires about $ 150 billion to make it world class, while a new innovation climate requires investment in the education system of six per cent of GDP instead of 2.8 per cent today. But an open competitive market system can find these resources provided the quality of governance and accountability is improved. Auctioning of natural resources such as spectrum, coal, oilfields, and land for commercial exploitation can largely substitute for tax impositions. Obviously, a wide-ranging second generation of reforms is necessary for all this to accelerate India's growth rate to 12 per cent per year.

 

What does the author want to express by using the phrase "It is like killing a patient to lower his body temperature"?

A)  The author is very much in favour of the steps taken by the RBI to curb inflationary pressure.

B)  The author is not satisfied with the steps taken by the government to remove corruption.

C)  The author is concerned about the systemic reforms before it is too late.

D)  The author wants to express his resentment against the steps taken by the central bank of India to contain inflationary pressure.

E)  The author is of the opinion that it is better to dismantle the faulty system than to try to make it better by investing further into it.