As policy makers keep a close watch on nervous markets in the aftermath of the US credit-rating downgrade, Prime Minister Manmohan Singh on Saturday said India needs to take "difficult" decisions to achieve 9% economic growth, but obliquely hinted that lack of political consensus could hold back "second generation" reforms in critical areas.
"Second generation reforms are essential. But they are also a lot more difficult and require a broad-based national consensus," Singh told reporters after a meeting of the full Planning Commission that approved the approach paper to the 12th five-year plan ( 2012-17).Experts tracking the economy have expressed concern that delay in policy reforms in areas such as insurance, pension, banking and retail trade could hold back growth in the world's second fastest growing major economy.
The amendment bill to hike foreign direct investment (FDI) limit in insurance from 26% to 49% was introduced in Rajya Sabha in 2008.
Another bill to legislate the Pension Fund Regulatory and Development Authority to provide social security to millions of employees was introduced in Lok Sabha this year as also the Banking Laws (Amendment) Bill to give more powers to the RBI to regulate the banking sector.
"We want financial sector reforms. But there is no effective national consensus… I hope to generate broad climate for all political parties to agree to reforms," he said.
The prime minister said it was decided that in the present global environment, it will be prudent to have a growth target of 9-9.2 % that is sustainable and inclusive.
A fresh question mark, however, loomed over India's ability to maintain growth and tame inflation that has hovered around 10% in the last few months.
"Priority should be to moderate inflation," Home minister P Chidambaram said.
Finance minister Pranab Mukerjee warned that aiming for higher growth rate can lead to unsustainable inflation and suggested aiming at about 9% GDP growth in the first three years of the 12th plan and higher growth in the remaining two.