Goldman Sachs: Indian economy's long-term growth rate potential 7%

"Although we feel the current long-term potential growth rate of the economy is 7 per cent, this could be notably higher if the reform process were to gain momentum," Goldman Sachs said in a research note.

According to the research note, India is expected to clock 6.5 per cent real growth in 2013, which would rise to 7.2 per cent in 2014 and further to 7.5 per cent in 2016.

India has been growing at an impressive rate of 9 per cent before the global financial meltdown pulled the growth rate down to 6.7 per cent in 2008-09.

Goldman Sachs lauded the recent reforms initiatives and said "the key to unlocking India's potential growth has been, and remains in, the area of reforms."

In recent times, the Indian government has unveiled a slew of reforms including FDI relaxation in retail and aviation sectors and partial de-regulation of diesel prices.

"To continue the imbalance correction process, and keep attracting foreign capital, the government would do well to increase the efficiency of the economy through deregulation and reform," Goldman Sachs said.

Notwithstanding the fact that a wide variety of initiatives are necessary, many of the reforms are likely to generate significant political resistance.

"Since India is a largely domestic economy, reform will usually cause friction with existing interests, which tend to resist reform, even though the net

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