PM expects 7 % growth in 2010-11, 9 % in medium term

Prime Minister Manmohan Singh today said there were clear signs of an upturn in the Indian economy and, with a normal monsoon next year, the country hoped to achieve a growth rate of over 7 per cent.

"I am happy to say that India has been able to face the global economic downturn better than most other countries in the world," he told the India Economic Summit organised by the World Economic Forum here.

He said the Indian economy grew at a "respectable" rate of 6.7 per cent in 2008-09 despite the global economic and financial crisis. In the current financial year, it had also faced the adverse impact of an inadequate monsoon and the resultant slowdown in the agricultural economy. Still, growth is expected to be around 6.5 per cent, he said.

"This performance in highly adverse circumstances indicates the resilience of our economy. It also vindicates to a large extent, the corrective action taken by our government to manage the downturn- like other countries we resorted to a significant stimulus and we will take appropriate action next year to wind this down," he said.

Dr Singh said the Government's medium term objective continued to achieve a growth rate of 9 per cent per annum.

According to him, taking into account the fact that the country's domestic savings rate is now as high as 35 per cent of the Gross Domestic Product (GDP), this is eminently a feasible target.

He said a return to high growth required work in many directions, with world demand expected to pick up but probably only slowly.

He said India's strategy must, therefore, aim at sustaining a high rate of growth on the strength of strong domestic demand. He said the Government was seeking to achieve this through a large increase in investment in infrastructure.

The Prime Minister said the development of high quality infrastructure was an essential requirement to fulfil India’s ability and capability of rapid growth.

"We have an ambitious programme of investment in all the key infrastructure sectors: Power, roads, ports, airports, telecommunications, irrigation and urban infrastructure. Some of this investment will be through the public sector. However private investment has a large and growing role to play in achieving our target. In many areas we are following a strategy of private-public partnership," he said.

He said that, to fulfil its commitment of achieving inclusive growth, the Government would also have to expand its expenditure in critical key social sectors, especially health and education, including skill upgradation of workforce on a massive scale.

Dr Singh said environmental sustainability was also an important objective and one that had gained significance in the context of climate change. He said the Government had prepared a National Action Plan on climate change outlining its response in this critical area focusing on increased energy efficiency and greater use of clean energy technology including solar energy. Special attention would have to be paid to prevent degradation of the country's scarce land and water resources, he said.

He urged foreign investors to participate in all these efforts, saying the Government's foreign direct investment (FDI) policy had been greatly liberalised. He said FDI had been freely allowed in more and more areas under the automatic route and now covered a number of sectors in agro-processing, nearly all areas of industry and also services.

He said that the accumulation of FDI inflow amounted to over $ 120 billion since 2001-02. He admitted this was not a large enough number, given the scale of India's economy, but in recent years the country had been listed as among the most attractive locations for FDI. In addition to FDI, India also welcomed portfolio investment in equity in Indian companies by qualified institutional investors, he said.

"Our policy will be guided by the desire to make India even more attractive for foreign direct investment. We are particularly keen to rationalize and simplify procedures so as to create an investor friendly environment," he said.

The Prime Minister also mentioned that the Cabinet had recently decided the criteria on which public sector enterprises would qualify for disinvestment. He said the Government now hoped to see faster progress in sale of a portion of its shareholding in the domestic market and issue of fresh equities in respect of the selected companies in the public sector.

He said that though the global financial crisis did not affect Indian banks or financial market directly, it drew attention to the need to strengthen the country's financial system in various ways. He said there was need to ensure that the financial system can provide the finance needed for the country's development, and especially for infrastructure development. This, he said, would open up a broad agenda for reform.

He said there was need to develop long-term debt markets and to deepen corporate bond markets. This. in turn, called for a strong insurance and pension sub-sectors and some of the reforms needed, especially in insurance, involved legislative changes, he said.

Dr Singh pointed out that the Government had taken initiatives in this area and would strive to build the political consensus needed for these legislative actions to be completed. He said there was need to improve futures markets for better price discovery and regulation. He also felt there was need to remove institutional hurdles to facilitate better intermediation.

"All these issues will be addressed through gradual but steady progress in financial sector reforms to make the sector more competitive while ensuring an efficient regulatory and oversight system," he said.

"India looks to the future with confidence and with hope. We are confident of meeting the domestic and international challenges to fast and inclusive growth. We are also better placed than any time in the recent past to push the reform process forward. I believe we have a bright future if we make use of our well known strengths and the opportunities that lie ahead. In the coming months and years, I hope to see a decisive change in the pace of our progress to becoming a leading economy in the world," he said.

Dr Singh noted that today's event marked the 25th anniversary of the first India Economic Summit in 1985, which was inaugurated by then Prime Minister Rajiv Gandhi.

He recalled that Mr Gandhi had, on that occasion, outlined the vision of India as a rapidly growing dynamic and modern economy, breaking free of the shackles of persistent poverty, hunger and disease. He said the Government had delivered substantially on that promise though the task was, by no means, finished.

He said India's growth rate had accelerated from 5.6 percent in the 1980s to an average of nearly 9 percent in the 5-year period preceding the global financial crisis.

He said India was today a more open economy, open to both trade and investment and integrating successfully with the world at large. It had also seen substantial progress in reduction of persistent hunger, poverty and disease, though more needed to be done in this area.

"Our strategy today is not just to deliver rapid growth, but to deliver rapid and inclusive growth, a growth that will provide productive employment to our young population and raise living standards in rural areas across the length and breadth of our vast country," he added.


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