India’s economic growth seen to continue despite global turmoil

02 February 2012 21:39  [Source: ICIS news]

NEW DELHI (ICIS)--India’s growth is expected to continue despite economic woes in Europe and the US, a top business leader said on Thursday, sustained by population expansion, a strong investment and bond profile and future demand.

Rajiv Kumar, secretary general of the Federation of Indian Chambers of Commerce and Industry (FICCI), told the PlastIndia conference that India’s gross domestic product (GDP) growth is expected to be 8.5-9% on average over the five-year period of 2013-2017.

Delivering the keynote speech at the two-day conference being held on 2-3 February, Kumar noted that India’s fourth quarter 2011 GDP growth was 6.9% and that this year’s expansion pace is likely to be 7-7.5%, a point lower than the nation’s most recent seven-year average of 8.5% GDP growth.

“Given the aspiration levels, a young population, and 12m jobs that need to be created every year in India, there is no alternative except achieving a rapid, inclusive and sustainable economic growth,” Kumar said.

He noted that India’s stock market and purchasing managers index (PMDI) are both at an eight-month high, the rupee (Rs) is gaining strength against the US dollar – climbing to Rs48/$1 from its earlier Rs52 ranking – saying that “India’s economy may hold good” in fiscal year 2012-2013.

However, he said, India should focus on dealing with macroeconomic management, inflation, bonds, and other short-term problems.

He said that he hopes that India’s annual budget, due in late March, will include policies to address those short-term issues.

India’s economic growth, he noted, is heavily dependent on domestic demand and expansion, because the country’s imports contribute a negative seven percentage points to GDP.

India’s domestic consumption accounts for as much as 67% of GDP and as much as 39% of investment, he added.

Consequently, Kumar said, “We have to rethink our growth strategies in terms of external demand” because trade volumes among developed nations are not as strong as those seen in 2010.

He said that India should encourage regional trading and business development, with trade flow rising in south Asia, southeast Asia and Asia as a whole – in contrast to the still struggling US economy and an expected new recession in Europe.

He also urged that India limit exposure to the sovereign debt crisis in Europe and the increasing debt load in the US in hopes of avoiding a “domino effect”.

Kumar said that India also needs to restore confidence among private investors, given that the nation’s economic future is dependent on them.

“The private sector has to grow alongside with the government,” he said.

He said he expects India’s inflation rate to ease back to below 6% by the end of March as interest rates decline and thus improve the nation’s investment climate.

The six-day PlastIndia exhibition runs through 6 February.

By: Ong Sheau Ling
+65 6780 4359

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