India can sustain high economic growth in the medium term but needs reforms to maintain the momentum over the longer term, Finance Minister P Chidambaram said on Tuesday.
NEW YORK: Finance minister Palaniappan Chidambaram said his “instincts” told him India would grow “closer to 9%”, which is “a good result at the end of the year”.
Later, at a business conference linked to the ‘Incredible India@60’ festival here, he said he was confident India would maintain “steady growth” of at least 8.5% in the medium term and need economic reforms to maintain the high growth momentum over a longer period.
“Thanks to colonialism, we missed the Industrial Revolution. We are trying to make up for that. In the last four years we have found our rhythm. India’s gross domestic product (GDP) is growing at 8.5%.”
Consumption, he said, is driving growth. “Unlike China, we have never denied our people the right to goods and services. Investment has now overtaken consumption as the key driver of growth.”
The finance minister also said India’s workforce will continue to outnumber the dependent population till 2030.
“This means that savings, and consequently investments, will remain at a high level. Fiscal prudence, investments, consumption and good savings portend that we can maintain the growth in the medium term — and with reforms over the long term,” Chidambaram told some 500 delegates here.
He said the government is committed to wiping out the revenue deficit by 2008-2009 and his “mantra” for fiscal consolidation would be “maintaining growth with equity.” He said the government is determined to adhere to the obligation under the Fiscal Responsibility and Budget Management Act.
“This year the fiscal deficit is budgeted at 3.3% and next year we will commit to go below 3%,” said Chidambaram.
The finance minister’s speech also took on political overtones as he tried hard to deflect criticism that the Congress-led government had not been able to include the poor in India’s booming economy.
“Growth is not an end in itself. The people of India must be included in growth. Every morning we wake up to the fact that 26% of the people live in abject poverty,” he said.
“This celebration in New York has been called Incredible India@60. India is indeed incredible.
My concern is that India should not be incredible beyond its stunning monuments, art and culture. It should be credible,” said Chidambaram.
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