‘The recently introduced economic reforms are moves in the right direction’

The Indian economy should be back to achieving 9 per cent growth in three years’ time, Chief economist of the World Bank and former Chief Economic Advisor to the Union Finance Ministry Kaushik Basu has predicted.

“Fortunately, there is a lot of activity that we are seeing in India. Growth-wise, the next two years will be difficult for India only because there is a little bit of a momentum of slowdown and more importantly the European crisis is affecting the whole world,” Dr. Basu said here on Wednesday at the inauguration of the India Finance Conference 2012.

Speaking about the introduction of foreign direct investment (FDI) in multi-brand retail, Dr. Basu said the biggest beneficiary of the initiative would be farmers while consumers would also benefit.

When asked if the autonomy given to States to decide whether or not FDI in multi-brand retail would be implemented in the respective States would give rise to disparities, he said that it was possible but the situation would be “almost a laboratory experiment.”

“I understand that different States take different views on it (FDI) and some are hesitant…In a few years we will see whether the States allowing FDI are doing well or badly. If we see that they are doing well then presumably states that were hesitant earlier will open up. If we see that they are doing badly then that would be a lesson for everyone,” he told journalists on the sidelines of the event.

Higher inflation

On being asked if the country should settle for a higher inflation rate, Dr. Basu said if the economy continued to grow at a higher rate of growth, inflation could be kept at 5 or 6 per cent.

“You can never take a policy decision that we are going to agree to live with higher inflation….But if the growth is real growth meaning that there is actually more food, more clothing, more everything being produced, you are getting a cushion against that,” he said.