Indian economy will grow 7-8% in 10 yrs: FM

By agencies   |   Tuesday, 29 March 2005, 08:00 Hrs
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SINGAPORE: The Indian economy will grow through its auto, drug and textile industries, Finance Minister P Chidambaram said in Singapore.

The economy will expand at 7- 8 percent in the next 10 years, the Finance Minister said. Growth will average above 7 percent, perhaps closer to 8 percent per annum. India wants to sustain economic growth at more than 7 percent in the next decade to cut its budget deficit and find money for investments in health, education and infrastructure.

The economy, estimated at $655 billion by the International Monetary Fund, may expand 6.9 percent in the year ending March 31. The second-lowest monsoon rainfall in at least 17 years has caused farm production to stagnate. India is committed to boosting the economy, he said. The Government will do nothing that will impede growth.

The growing labor force and the growing savings rate, coupled with our policy focus on human capital, infrastructure, taxation and the financial system, suggest that GDP growth is very likely to accelerate significantly into the future, the Finance Minister said. The shifting in demographics and rising incomes will also boost the household savings rate from 28 per cent.

Expanding the number of service industries that pay a sales tax will help reduce the budget deficit to 4.3 percent of gross domestic product in the year starting April 1, the lowest since 1997 from 4.5 percent this fiscal year. The government needs to boost revenue to pare its $34 billion budget deficit and finance $150 billion in infrastructure spending in the next decade as the nation vies with China for overseas investment.

Boosting overseas investment is key to economic expansion. The investment rate will start rising this year, he said. India received just $4.68 billion of foreign direct investment in the financial year ended March 31, 2004, compared with $60.6 billion by China in 2004. India is seeking $15 billion of such investment.

Overseas investors bought a net $3.94 billion in stocks and a net $156.3 million in bonds this year as of March 23. They invested a record $9.19 billion in stocks and bonds in 2004. The Minister said that by 2015, stock-market capitalization would be 55 percent of GDP, equivalent to about $900 billion. India expects the Comprehensive Economic Cooperation Agreement with Singapore to be ready "in the next few weeks," the Minister said.

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