In an otherwise predictable Independence Day address, the Prime minister got one thing right: The relative emphasis on terror and development.

By focusing almost entirely on the latter, Manmohan Singh appeared to suggest that growth with welfare was the country’s best long-term bet against religious or political extremism. For instance, Naxalism is rife in India’s tribal belt, a region of economic backwardness.

This area needs a functioning welfare state, and not a Salwa Judum, to quell the Naxal menace. The National Rural Health Mission, with its accredited social health activists, should make its presence felt here, as should the Sarva Shiksha Abhiyan and National Rural Employment Guarantee Programme.

With his background as a bureaucrat, Singh should dwell on issues of implementation and accountability in centrally-sponsored schemes, while also enhancing government spending in health and education as a proportion of gross domestic product, now just 0.9 per cent and 2.5 per cent, respectively. Naxalism and religious fundamentalism spring from disparate ideologies, but they point to the lack of inclusiveness in economic and political processes.

A democracy does not become inclusive merely by giving everyone the right to vote; its institutions must be even-handed as well. The struggle against militancy should go beyond a security response to providing justice, economic and political, to all.

The macroeconomic environment is ripe for the Prime minister to chart another course. India could register its fourth consecutive year of 8 per cent growth this fiscal. Hardening interest rates present both a challenge and an opportunity.

The Centre can, in fact, reconcile social commitments with fiscal concerns if it reviews expenditure on defence and internal security in the medium term and explores political and social solutions to law and order problems. Redistribution cannot proceed at the expense of growth, hence the prime minister should not lose focus on reforms. India needs foreign direct investment (FDI) flows to the extent that it can run a current account deficit of 2-3 per cent of GDP.

The boom in the business cycle, which started towards the end of 2003-04, shows no signs of abating. Project lending in power and textiles sectors in 2005-06 was double that in 2003-04, while lending towards services increased five times.

If credit drives investment rather than consumption, India might be able to grow at a medium-term rate of 8 per cent while keeping inflation at bay. High, equitable growth would render India a safer place.

<B>From India

Source: Editorial

© Times of India</B>