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NEW DELHI: India's economy was booming at 9 per cent or more in the last three years. However, it was hurt by the global economic slowdown and the government had to step in with fiscal stimulus packages.
With signs of a pickup in industrial output, the economy is now expected to grow at 7 per cent in 2010. But the government is confident that with a thrust on research and development in agriculture, growth could hit double digits by 2012.
"I will be happy if I have 7 per cent plus for the next year and 8 per cent for the year after that. And thereafter, I think the momentum will gather and it will be possible to have 9-10 per cent during the initial years of the 12th plan period in 2012," said Pranab Mukherjee, Finance Minister of India.
Concerns still prevail because global demand is only picking up at a slow pace. And so, the government has given the assurance that it will not yet withdraw its stimulus measures packages.
The government will start to phase out the measures only next year, when it introduces more reforms, particularly in the financial sector.
The government plans to resume divesting public sector enterprises in order to raise capital. It also aims to attract larger inflows of foreign direct investment, especially in infrastructure.
Indian Prime Minister Dr Manmohan Singh said: "World demand will pick up but probably only slowly. Our strategy, therefore, must aim at sustaining a high rate of growth on the strength of strong domestic demand.
"We seek to achieve this through a large increase in investment in infrastructure. The development of high quality infrastructure is an essential requirement to fulfil India's ability and capability of rapid growth."
Meanwhile, the government will keep a close eye on inflation - which some say could touch 6.5 per cent by March 2010. Food prices have been spiralling up because of a deficient monsoon, and rising global commodity prices are adding to inflationary pressures.
Another major challenge that is confronting policy makers is fiscal consolidation. The government's finances have been stretched due to the economic crisis and it is borrowing heavily from the market.
It is a tightrope walk to balance the government's and private sector's credit requirements, but the Finance Minister has assured that a major portion of government borrowings is over and it will bring down the fiscal deficit from 6.5 per cent in 2009 to 4 per cent by 2012.
- CNA/sc
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