Finance Minister P Chidambaram said on Tuesday that stronger growth was ahead for India because investment had surged ahead of consumption, showing a stronger foundation for the future.
More reforms are needed to sustain high economic growth in the long term while there was also a need for structural changes to help inclusive growth that would cover all sections of society, he said in a keynote speech at a seminar organized by Asia Society and the Confederation of Indian Industry (CII) in New York marking the India @60 promotional event.
The government has already reduced the fiscal deficit to 3.3 per cent in the last financial year and expects to bring it down to below 3 per cent by next year. By 2008-09, the government has targeted to wipe out the revenue deficit, he said.
"In 2001-02, the consumption was the principal driver of growth. Unlike China we have never prevented consumption by people. After 2002-03, it is investment led growth. And in 2006-07, investment has overtaken consumptions. India's investment-to-GDP ratio has touched 35.3 per cent while saving is at 33.8 per cent. All these measures are going to help the growth story," said Chidambaram.
The Indian economy has undergone a structural change in the recent past. There is significant improvement in productivity gains of labour as well as capital, the minister said, adding that after missing out on globalization's first-phase gains on account of colonial rule, India had averaged 8.6 per cent growth over the past four years, with the figure touching 9.4 per cent in 2006/07.
Keeping a strong political and social agenda, Chidambaram said India needed ways to deliver health services, public goods and education in a more efficient way. "It is very unlikely that private sector will provide the good and services efficiently as per the need of common people," he said.