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India can sustain rapid growth for 20 yrs
India can sustain rapid growth for 20 yrs
Monday December 03, 2007
India's economy can keep up its scorching growth for the next two decades as long as investment stays strong, the finance minister said on Sunday.
India's economy has grown by an average annual 8.6 percent for the last four years and the minister has said he is targeting "close to nine percent" expansion this year.
"The biggest challenge (for maintaining high growth) is to keep investment growing," Finance Minister P. Chidambaram told an international economic summit in the Indian capital.
"We can keep this (high) growth continuing for the next 10, 15, 20 years" as long as investment remains robust, he said.
"I have a simple philosophy -- to keep the economy growing, we have to keep investment growing," he said, calling it a "virtuous circle."
"Indians are good savers. As long as I keep investment going, there will be more jobs" and that will translate into more savings and investment, he said.
The country's investment to gross domestic product ratio, a key measure of growth potential, was running at a healthy 35 percent, he said.
Chidambaram said he was targeting a rise in the ratio to 40 percent in the next five years that he called "perfectly achievable."
His comments followed data late last week showing India's economic growth slowed to 8.9 percent in the second quarter, still second only to China's among major Asian economies, from 9.3 percent in the first quarter.
But analysts have predicted a further weakening in the months ahead as the impact of aggressive monetary tightening to tame prices and a rising rupee takes its toll on what has been blistering expansion by Asia's third biggest economy.
At the same time, Chidambaram admitted that India's economy faces significant problems in pushing forward vital economic reforms.
"Financial sector reforms are lagging behind, in banking, insurance, pensions, there is an unfinished agenda," he said.
"The financial sector is at the heart of economic of the economy, we have not been able to push forward with these reforms," the minister said.
"It is a disappointment," he said, but added that the ruling Congress-led coalition had 16 months left in its electoral mandate to "make some progress" in these areas.
The minority coalition depends for its survival in parliament on its communist allies who are vociferously opposed to economic reforms.
AFP
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