India needs to speed up reforms and maintain fiscal discipline to sustain high economic growth, Finance Minister Palaniappan Chidambaram said on Friday as he hinted at more steps to keep inflation under 4 per cent.
Government data on Friday showed that India's economy grew at the rate of 8.9 per cent in the April-June quarter, and the minister said it was possible to maintain growth of more than 7.5 per cent in coming quarters.
"We must continue to follow fiscal discipline and prudence," Chidambaram told reporters.
"Unless financial sector reform is completed, it will be hard to sustain a high growth," he said, but added a combination of reform and discipline could enable the economy to sustain growth rates of more than 8 per cent.
India's gross domestic product (GDP) grew 8.4 per cent in the fiscal year ended March 2006.
The federal deficit rose to 906.78 billion rupees ($19.7 billion) in the April-August period, 61 per cent of the full year target, the minister said, adding the revenue deficit was 793.98 billion rupees.
But given the buoyancy in tax collections, Chidambaram said the government would meet its fiscal targets during 2006/07.
India aims to bring down fiscal deficit to 3.8 per cent of GDP in 2006/07 from 4.1 per cent in 2005/06.
The government wants India to be a manufacturing hub in 12 to 24 sectors. To that end, it is setting up special economic zones for petrochemicals, information technology, electronics, pharmaceuticals and auto parts.
It has also promised tax breaks and access to bank loans to achieve high growth in manufacturing.
"The government will ensure that credit is not denied or delayed, and is available at reasonable rates to productive sectors," Chidambaram said.
The minister noted there was pressure on food prices, and said he would discuss further steps with the central bank governor to keep inflation in check.
Government data showed on Friday the annual inflation at 4.56 per cent for the week ended Sept. 16, and Chidambaram said the government intended to keep it at 4 per cent or less.
The Reserve Bank of India next reviews monetary policy on Oct. 31.