New Delhi: India’s demographic profile, which gives it a workforce that’s among the youngest in the world, will be a key driver of economic growth in the medium term for the country, helping it maintain a robust momentum, finance minister Pranab Mukherjee said on Sunday, addressing global and local business leaders.
The Indian economy, which grew at 7% in the last two fiscal years, may expand at 9% this fiscal, he predicted, based on trends that have emerged in the last 12-18 months after the global meltdown.
“Savings and investment rates have reached levels that even 10 years ago would have been dismissed as a pipedream for India,” Mukherjee said at the World Economic Forum’s India Economic Summit in Delhi. “On this important dimension, India is now completely a part of the world’s fast growing economies.”
“Since these indicators are one of the strongest correlates of growth and do not fluctuate wildly, they will speak for India’s medium-term growth prospects,” the finance minister said.
Mukherjee said growth over the next two decades will speed up because its young working population will save and spend.
“It also has to be kept in mind that, as the demographic dividend begins to pay off in India, with the working age group population rising disproportionately over the next two decades, the savings rate is likely to rise further provided we are able to create productive employment opportunities at the required pace,” he said.
The finance minister hailed the expansion of Indian firms overseas, which “lends to an optimistic prognosis for the economy in the medium to long run”.
Signs that economy growth is accelerating are visible in the numbers, Mukherjee said, with gross domestic product (GDP) growing at 8.8% in April-June.
“The recovery is broadbased, with growth in all sectors,” he said. “The challenge now is to quickly revert to the high GDP growth path of 9%-plus and even find the means to cross the ‘double-digit growth barrier’ in the coming year or two.”
Corporate earnings and profits have picked up and Indian exports have recorded impressive growth since November-December 2009, even though manufacturing momentum is an area of concern.
“The manufacturing sector has been showing buoyancy reminiscent of the pre-slowdown years, though some concerns on its growth momentum have emerged in the last month or two,” he said.
The finance minister, however, chose to avoid questions on telecom minister A. Raja, saying Parliament is in session. “Whatever needs to be said on telecom minister A. Raja will be said in Parliament,” he said.