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We must overcome barriers for high growth: FM

business Updated: Dec 24, 2010 17:07 IST

The government on Friday exuded confidence that economic growth in the current and the next quarter will be as encouraging as 8.9% recorded in the previous two quarters, but said India must tackle barriers to ensure double-digit level growth.

"It is expected the...two quarters would be as encouraging, if not better... we assume that we will be able to reach 8.5-8.7% of GDP growth this year and perhaps next year will be able to reach a higher level," Finance Minister Pranab Mukherjee said at the annual general meeting of the PHD Chamber.

However, the country will have to tackle host of national and international problems to register double-digit growth on a sustainable basis, he said.

"It (double digit growth) must be on a sustainable basis and for that we shall have to ensure that the challenges that we are facing today, one on the price front, another on fiscal consolidation and third certain developments which are taking place (internationally)," he said.

Indian economy grew by 8.9% in the first two quarters this fiscal. The government's Mid-Year Analysis projects the economy to grow by up to over 9% this fiscal.

If this happens, Indian economy would expand at a pace, registered during the three years before the global financial crisis hit the economy in 2008.

While India is charting a high growth path, Mukherjee said there are "many barriers" which need to be crossed for achieving a sustainable double-digit GDP growth.

While the government is desperately trying to bring down rates of essential food items, the wholesale price based inflation for November was about 7.5%.

The recent spurt in onion prices has catapulted food inflation to double-digits level during the week ended December 11.

Besides, high tomato and international oil prices could further push up the inflation.

The Finance Minister said the Reserve Bank's decision to inject Rs 48,000 crore into the system without hiking policy rates shows that the central bank is not only fully aware of the inflationary pressures but also mindful of the requirements for higher growth.

Mukherjee exuded confidence that the government's fiscal policy and RBI's monetary actions are in tandem and will help the economy recover and achieve higher growth trajectory.

The RBI has decided to inject Rs 48,000 crore into the system by buying government securities through open market operations, as the system faces cash crunch due to high credit needs and advance tax payments. Top 100 companies paid over Rs 25,000 crore of advance tax in the third quarter of this fiscal.