PM pegs growth at 10%, harps on pro-poor policies

Investment rate in the economy was 31.7% of the gross domestic product in the third quarter of last fiscal ending December?one of the highest in the world.

Although Singh did not spell out his plans on the long-pending financial and economic reforms, analysts said that the target he set out for himself would entail a prompt reform push. Singh himself has pitched for higher investment in social and economic infrastructure, enhanced farm productivity and a fresh impetus to the manufacturing sector?all of which would involve key reform steps.

?The PM may not have mentioned economic reforms on Monday, but it is implicit in the agenda set out for a 10% growth in the medium term, that also touches upon the need for increased investments in infrastructure. If we are to have $1 trillion investment in infrastructure during the next five year plan, obviously, it entails development of the corporate bonds market as well as broader financial sector reforms,? Samiran Chakraborty, regional head of research, India, Standard Chartered told FE.

Singh said that the government expects 8.5% GDP growth this fiscal, significantly higher than the previous year?s 7.2%.

On inflation which is almost at double-digit level and a cause for concern for policymakers, he said it would moderate to around 5-6% in December, and hinted at a permanent Centre-state mechanism to monitor the inflationary tendencies. Inflation, especially the resultant high price of basic foods that affects the common man, was the first question he had to answer in the conference. Headline inflation for the month of April stood at 9.58%, and the latest weekly inflation numbers saw food inflation inching up for the second straight week to touch 16.49%.

The PM said the government is committed to speed up economic growth to a spectacular 10% a year in the near future, which he said would require putting more money into social and economic infrastructure and in boosting agricultural productivity.

Government estimates in February showed that agriculture output may have decreased by 0.2% last fiscal due to the severe drought leading to an 8% fall in food grain output, 5% dip in oilseed production and 11.8% fall in sugarcane output. Manufacturing sector, on the contrary, showed a rebound to 10.9% in 2009-10 compared to a meagre 2.8% growth the year before as the government cut taxes and the RBI helped in lowering the cost of funds.

The PM did not make any comment on oil sector reform, the urgency of which has come to the fore with the prospect that the average yearly price of Indian basket of crude this fiscal would be over $90 a barrel. Neither was any mention in his opening statement or later while answering queries about the much-sought-after steps to open up insurance, banking and retail sectors to overseas players.

?Most important pending reform is the oil sector reform. We have already missed the bus last year when oil prices were low. This is now the most opportune time for implementing these reforms,? said Bank of Baroda chief economist Rupa Rege Nitsure.

The prime minister made the self-critical assessment that his coalition government could have done more in its first year. He however listed out the positives as well. ?We have given our country a government which works, which has delivered high rates of growth, which has accelerated the process towards inclusive growth and I have every reason to believe we will complete our term,? Singh said.

Singh said the projected 8.5% growth this fiscal is widely regarded as one of the best performances among the larger economies of the world. The ruling coalition, which came back to power last year on the promise of an ?inclusive growth? agenda is betting on a fast economic growth to take more than one third of the country?s 1.2 billion people out of poverty.