|
India’s Prime Minister Manmohan Singh said on Wednesday that the economy could be growing by 10% a year by 2012 with the right set of policies.
Addressing the 54th National Development Committee meet in the capital New Delhi to approve the 11th five year plan, Manmohan Singh, however, warned that the US sub-prime crisis and the slowing down of the US and other leading economies might trim exports and capital flows that will affect the Indian economy.
"It is possible that with the correct set of policies ... we will not only be able to maintain this momentum of high growth into the near future but may be able to raise it to 10%," Manmohan Singh told top policy makers.
Annual growth fell below 9% for the first time in three quarters to 8.9% in the September quarter as industrial output slowed due to monetary tightening by the Central Bank aimed at curbing inflation.
The world’s second fastest-growing major economy after China grew 9.4% in the last fiscal year, the strongest in 18 years. Its surging economy has attracted global investors and fuelled a stock market boom.
"This high growth rate has become possible because of the historically high savings and investment rates which we are witnessing," Singh said.
"Our savings rate, after stagnating for almost two decades, has touched 34% of GDP and the investment rate has crossed 35%. These high rates ... are likely to go up in future because of our young population profile," the prime minister added.
The Indian prime minister also cautioned that India cannot remain immune to international events like sub-prime crisis in the US. The Indian economy, despite its heavy reliance on domestic demand, may not be totally immune to the global credit crisis.
"There are some clouds on global financial markets following the sub-prime lending crisis. There are worries that the growth of the US and other leading economies may slow down and some may even go into a recession. This may impact both our exports as well as capital flows...We cannot be fully immune to international developments."
To address such concerns, India must redouble efforts to maintain domestic drivers of growth, the prime minister said. The government is looking at ways to minimize the impact of the rupee’s appreciation on exporters, who have seen their margins shrink by a 12% rise in the currency this year.
However, despite a surge in the value of the rupee against the dollar this year, which is hurting exporters, and high interest rates, top officials believe they can maintain growth momentum of the past few quarters.
The Reserve Bank of India, in a bid to ease price pressures and stop the economy from overheating, raised interest rates five times between mid-2006 and March this year, but has since held them steady.
Pointing to the rising food and commodity prices, including oil, Manmohan Singh stressed on the need to create buffer stocks of pulses and edible oils to improve its food security.
"We probably need to enhance our buffer stocks of food grains and also consider buffer stocks for pulses and edible oils".
The prime minister said domestic consumption pattern would put "increasing pressure on both the availability and prices of basic food items."
In order to withstand these pressures, he said, "We need to ensure that the agriculture sector not only performs as per our expectations but also that our food planning adjusts to the emerging market realities."
Calling upon States to ensure better targeting of subsidies the prime minister said "we need to revisit our food grain procurement strategies in the short term...also ensure that subsidized food grains are targeted at only the needy and the poor and that leakage and misdirected subsidies are stopped."
With global crude prices touching record highs, the prime minister called for cutting down losses in the power sector and stressed for a push towards a less energy intensive economy.
"with international oil prices shooting up each day, it is both in the interest of energy security and environmental security that we make our economy less energy intensive," the prime minister said.
|
