Shaking off prophesies of doom, a confident Prime Minister assured Parliament on Friday that in a couple of years, he would take the country back to the days of high economic growth.
The stock market responded immediately, with the four-day-long rally hitting a peak.
Manmohan Singh’s mood seemed to be lifted by an announcement a day ago by international rating agency Moody’s Investor Services, which said it expected the Indian economy to grow 7% through 2014.
“We will use all our policies to push up the growth rate. We hope and it is our confidence that in two to three years, the economy will bounce back to high growth of 7-8%,” Singh told Rajya Sabha while responding to a debate on the President’s address.
The Sensex, the benchmark index of the Bombay Stock Exchange, rose for the fourth straight day, riding on hopes that the RBI would cut interest rates amid signs of improving government finances and a firmer recovery of the global economy.
On Friday, the index jumped 270 points (1.4%) to close at 19,683, a level last seen on February 4.
Singh rejected the BJP’s claim that the NDA government had performed better and cited figures in various sectors to show the country had grown faster during the nine years of UPA rule.
“The leader of opposition is right in saying India needs growth rate of .... He is also right when he said it will require rapid pace of industrialisation... This is precisely the intent of the UPA government,” he said.
Last week, finance minister P Chidambaram presented Budget 2013-14 that sought to keep a tight lid on government finances and lower fiscal deficit to 4.8% of GDP — the market value of all final goods and services produced during a particular period.
The fiscal consolidation steps are expected to persuade the RBI to reduce interest rates and encourage new investments.
Experts believe the RBI, which has refused to cut rates in the past citing high inflation, would weigh the pressures on prices before making any decision. Inflation measured by the wholesale price index declined to 6.62% in January from 7.18% in December and 7.24% in November.