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Investment in infrastructure key to economic growth

 
Development of infrastructure in India is a key factor for economic growth and for attracting investments while the country demographic profile is better than China, said a senior official of Reserve Bank of India (RBI) in Chennai on Tuesday.

Delivering the 33rd Frank Moraes memorial lecture at an event organised by United Writers' Association, Subir Gokarn, deputy governor of RBI, said lack of infrastructure would impact investment, which in turn affect job creation and overall economic growth.

He said the global economy is not good and recovery will not happen soon and priority should be accorded to infrastructure.

According to Gokarn, the working age population in India is set to grow over the next two decades while the population in China would age significantly during that period.

The challenge is to generate more jobs for that population.

According to him, agricultural labourers may be hindered by factors like absence of skill or labour laws in finding jobs in industries.

Gokarn said in the interests of labour and the industry the labour laws have to be made flexible.

On the correlation between inflation and growth in gross domestic product (GDP), Gokarn said low inflation is a facilitating factor for investment and a precursor for high growth period. However after witnessing growth the inflation became sticky while the growth has gone down.

He said the food inflation now is fuelled by high prices of protein items like milk and vegetables whereas traditionally it used to be cereals and sugar.

According to him, productivity has not matched the demand resulting in high inflation.