India’s economy will soon return to high growth, the government pledged yesterday, as official data showed industrial output expanded at its fastest clip in seven months and car sales surged.
The economy is expected to grow by just 6.9 per cent in the current fiscal year to March 31
President Pratibha Patil told the opening session of Parliament that India’s economic fundamentals “remain robust” and the government was confident it would “soon steer the country back to the high growth trajectory of eight to nine per cent”.
The economy is expected to grow by just 6.9 per cent in the current fiscal year to March 31, the weakest pace since the 2008 global financial crisis.
Asia’s third-largest economy grew by over nine per cent for several years in the past decade and the Congress-led government has targeted a return to nine per cent expansion in its latest five-year plan which starts in April 2012.
Experts have traditionally pinpointed nine to 10 per cent growth as the minimum to substantially reduce the crushing poverty of hundreds of millions of Indians.
The government’s confidence was buoyed yesterday by figures showing an unexpectedly strong 6.8 per cent industrial production rise in January from a year earlier that far outpaced analysts’ forecasts of a 2.1 per cent increase.
The numbers that defied interest rates at four-year highs and slowing global markets marked a “strong recovery” from December’s 2.5 per cent production growth, Finance Minister Pranab Mukherjee told reporters. The output data, driven by an 8.5 per cent leap in manufacturing, prompted analysts to review gloomy forecasts for overall growth but they warned against reading too much into the monthly numbers which are notoriously volatile.
The output figures coincided with data showing new car sales climbed 13.1 per cent year-on-year in February as the sector rebounded from a slump in 2011.
Mr Mukherjee is to present the budget on Friday in which he is expected to set a growth target of 7.5 per cent-eight per cent for the next year to March 2013. The President, presenting the government’s legislative blueprint for the session, said the government hoped to bring in a long-awaited Goods and Services Tax to harmonise levies across India and ease the movement of goods.
The tax is one of the government’s most important proposed reforms but must be approved by two-thirds of Parliament and half of India’s states to become law, meaning the coalition will have to rely on opponents to see it passed.
The President also said a contentious land acquisition act will be introduced, seen as key to opening the door to infrastructure spending.