10% growth rate possible: FM
"If we can ramp up the investment to GDP ratio to 30 or 32%, then 10% is possible," Chidambaram said at WEF.india Updated: Jan 27, 2006 12:27 IST
Finance Minister said on Thursday that Asia's third-largest economy could grow by 10 per cent in the 2006/2007 fiscal year if investment levels were ramped up.
"Eight per cent (economic growth) is perhaps the ceiling for the current year, given the current level of investment as a proportion of gross domestic product (GDP).
"But if we can ramp up the investment to GDP ratio to say 30 or 32 per cent, then 10 per cent is possible," Palaniappan Chidambaram said at the World Economic Forum in Davos.
"(We will) aim at 8 per cent (but) we should try to do better than that ... To the extent that we fall short of our requirement of 32 per cent or so, then we would have to open the door more wide for foreign direct investment."
India's rising economic importance has been widely promoted at this year's summit in Davos, where chief executives and politicians gather to discuss global trends and network.
Many Davos participants were surprised at the Reserve Bank of India's decision this week to increase short-term interest rates by a quarter per centage point, but Chidambaram said that the move could be reversed in April.
"Once we are more certain about the external situation and what happens in the United States, this could be reversed even as early as April."
India's government wants to encourage more foreign investment into the economy, but its reliance on union-backed communist parties for support has hampered attempts to dismantle protectionist laws.
Chidambaram said he hoped to introduce a bill calling for an increase in the cap on foreign investment in the insurance industry to 49 per cent from its current rate of 26 per cent during this parliamentary session.
He declined to say whether the bill, eagerly awaited by international insurance groups, would be passed.
"We are a democracy, and I have to ultimately heed to the wisdom of parliament but we are going to give it our best shot."
Left-wing opposition has also prevented more partial privatisation, crucial to the funding of government projects for the poor.
Chidambaram said that in the new fiscal year, which begins in April, he hoped to partially privatise between six and eight public-sector firms and raise roughly $1.5 billion to $2 billion in the process.
He declined to say which state-owned companies he had in mind.