New Delhi: Finance minister Pranab Mukherjee on Sunday exuded confidence that the economy would soon revert to 9% growth, witnessed in the pre-crisis period, even as industrial growth plunged to a 16 month-low of 4.4% in September.
The finance minister said the challenge now is to find the means to cross the double-digit growth barrier in the coming year or two.
“In the short term, it is reasonable to expect that the economy will go back to the robust growth path of around 9% average that it was on before the global crisis slowed it down in 2008,” Mukherjee said at the India Economic Summit.
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Although manufacturing growth has slowed down in the past couple of months, the finance minister said the sector has been performing strongly.
“Finally, the manufacturing sector has been showing buoyancy reminiscent of the pre-slowdown year, though some concerns on its growth momentum have emerged in the last month or two,” Mukherjee said.
For the second consecutive month this fiscal, industry performed poorly in September. Its growth plummeted to 4.4% September after 6.92% in the previous month.
Manufacturing sector, comprising almost 80% of Index of Industrial Production (IIP), grew at slower rate of 4.5% in September, against 8.3% a year ago.
Mukherjee based his confidence in the growth story on high savings, investment rates and pick up in corporate earnings and profit margins.
“The savings and investment rates have reached levels that even 10-year ago would have been dismissed as pipe dream for India... Since these indicators are some of the strongest co-relates of growth and do not fluctuate wildly they speak well for India’s medium growth prospects,” he said.
Mukherjee added, “Second, the arrival of India’s corporation in the global market place and the sophisticated corporate culture that many of these companies exhibit lends to an optimistic prognosis for the economy in the medium to long run.”
The finance minister said the government’s objective is to harness high growth for the development process by making economic expansion inclusive.
“We are acutely conscious that if our efforts (on inclusive growth) have to bear fruit we have to tackle issues of governance and service delivery,” Mukherjee said.
Indian economy grew at an average rate of 9% per annum during 2004-05 to 2007-08. After the global financial crisis, Indian economy slowdown to an average growth of 7% during 2008-09 and 2009-10.
In the first quarter of this fiscal, economic growth rebound to 8.8%. “The recovery is broad based with growth in all sectors,” the finance minister said.
This fiscal, the government expects to grow by 8.5%. Talking about various reforms, Mukherjee said the government has decided to set up financial stability and development council, financial sector legislative reforms commission to rewrite financial sector loss.
He said efforts are under way to introduce new indirect tax (GST), while the direct taxes code has been unveiled to replace the archaic income tax act.