A ‘business-as-usual’ approach will not work if the Indian economy is to achieve its long-term 9 per cent annual growth target, which is “very ambitious” in the backdrop of global uncertainties, Prime Minister Manmohan Singh said on Monday.
In his address at the Golden Jubilee celebrations of the Indian Institute of Management (IIM) here, Dr. Singh said while the Indian economy has inherent economic strength, “difficult things would be needed” to reach the growth target.
The Full Planning Commission had set a goal for nine per cent annual economic expansion in the 12th Plan (2012-17) at its meeting last week.
He said India has been transformed into one of the fastest growing emerging markets in the world. “If we can continue to grow at this rate, we are well-positioned to be the country with the third-largest GDP in the world by 2025,” he said.
But robust growth would not happen “automatically by simply proceeding on a business-as-usual basis... It may seem that a transition (from 8.2 per cent in 11th Plan) to nine per cent growth is not difficult... However, it is in fact a very ambitious target given the current global economic situation...,” the Prime Minister said.
He said the global economy is facing uncertainties about industrialised countries and their implications for capital markets.
“Our own economy has also slowed down compared to last year and this year’s growth may be around eight per cent or a little more, at best,” he said.
Following the downgrade of the US credit rating, capital flows to emerging stock markets, including India, have been hit severely.
The Prime Minister highlighted the challenges before the Indian economy, which include tapping its full agricultural potential, building and financing infrastructure, achieving energy efficiency and its rational pricing and planning rapid urbanisation.
Despite this, he said the country has been transformed into one of the fastest growing emerging markets in the world.
He said that with India’s growing economic weight, “our voice is also heard more carefully in the councils of the world.”
From being a relatively closed economy at one time, it has become more open both for trade and technology flows, he said, adding that India is now viewed as one of the most attractive destinations for foreign direct investment.
The country received USD 13.4 billion in FDI during the first quarter of the fiscal, an increase of 133 per cent vis-a-vis the year-ago period despite uncertainties in the global economy.
He said the 21st century has been called an Asian century because a shift is taking place in economic power from the industrialised countries of the West to a new dynamic Asia.
“I am happy to say that India is playing its part in this transformation... India’s corporations are expanding their footprint abroad through investments and mergers and acquisitions,” Dr. Singh added.
He said that many countries have grown rapidly at 9 to 10 per cent per year for two or three decades before slowing down.
“Japan did it in the middle of the last century. Korea repeated the same performance in the second half of the last century. China, too, has been growing at this rate through the last two decades of the last century and the first decade of this century,” he said.
India is now capable of repeating the performance of this group of Asian countries, Singh said.
But that robust growth would not happen “automatically by simply proceeding on a business-as-usual basis”, he said.