Economic Survey: India Can Achieve 2009 GDP Growth of 7 Per Cent
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New Delhi, India, 2 July 2009. India could achieve 7 Per Cent GDP growth in 2009, and then return its previous 9 per cent plus showing from 2010, but only if significant financial reforms are enacted. That was the verdict of the annual India Economic Survey of 2008 – 2009.[br]
New Delhi, India, 2 July 2009. India could achieve 7 Per Cent GDP growth in 2009, and then return its previous 9 per cent plus showing from 2010, but only if significant financial reforms are enacted. That was the verdict of the annual India Economic Survey of 2008 – 2009.[br]
The Economic Survey is prepared by the Ministry of Finance normally forms the backdrop for the Indian Budget, which is due to be presented to Parliament on Monday 6 July 2009. The survey presented a generally optimistic picture, saying that the economy was showing underlying resistance and domestic consumption was continue to rise, despite the global Financial Crisis.
The report stated that ‘policy and institutional bottlenecks’ were holding back the economy. It went on to state that “it is therefore imperative that the government revisit the agenda for pending economic reforms in the first instance with a view to renew the growth momentum.”
It has cited the need to remove fuel subsidies and accelerate infrastructure development. “The Eleventh Five-Year Plan has estimated an investment requirement of US$500bn in infrastructure for broad-based and inclusive growth. The foregoing analysis indicates that achieving this is a challenging task” the report stated. In particular, reforms are needed to help private investors join the Public-Private-Partnership (PPP), a key pillar of the infrastructure development plan. This includes removing red-tape and enabling greater access to long-term project finance.[br]
The Economic Survey has also called for expediting the Banking Regulations Bill to allow greater flexibility and oversight, allowing increased foreign direct investment (fdi) in banks and the retail sector, and lifting the ban on commodity futures. High Net Worth individuals should be allowed to invest directly in capital markets, the report said, rather than be constrained by participatory notes, while the spot, futures and long-term debt markets should also be liberalised, including the investment rules governing insurance and pension plans. To further help long-term debt markets, the Survey recommended that the repurchase of corporate bonds be permitted, allowing greater liquidity for private enterprise and investors alike.
India achieved over 9 per cent GDP annual growth from 2006 – 2008. The Economic Survey felt with reforms in place, 2010 could see growth rates of at least 8.5 per cent, and that this trend line could continue in the medium term.
The report was confident that inflation was no longer a worry. This seems to be backed up by the fact that the latest Wholesale Price Index shows prices 1.3 per cent less than they were a year ago.
It was concerned, however, that stimulus spending has pushed the government fiscal deficit up to 6.2 per cent in 2008 – 2009, and it has called for ‘urgent’ returns to the targeted deficit level of 3 per cent.
Having won a resounding victory in the Indian elections, we predicted that Prime Minister Manmohan Singh would enact sweeping reforms. The Economic Survey will help build confidence in those reforms, which could go even further than previously believed possible.
Dwayne Ramakrishnan, EconomyWatch.com
