Economy will grow by over 5%: Chidambaram

Finance minister P Chidambaram today continued to present a rosier picture of the Indian economy than perceived by global economists.

Calling the International Monetary Fund's GDP growth projection of 3.75 per cent for the country as pessimistic, he said the economy is expected to grow by 5 to 5.5 per cent in the current financial year on the back of a good monsoon, robust farm output, and the impact of economic reforms carried out by the government over the last year.

"We expect these measures to show their impact from the second half of the current fiscal and believe that the Indian economy will grow at over 5 per cent and perhaps closer to 5.5 per cent in 2013-14," Chidambaram told a US think-tank.

"I know that the World Economic Outlook report (of the IMF) does not share my optimism, but I may tell you that we do not share their pessimism," Chidambaram said in an address to the Carnegie Endowment for International Peace in Washington.

He highlighted six 'key' fundamentals of the Indian economy, including the financial system, a skilled workforce and strong corporate houses that have been contributing to the country's growth momentum.

He did not, of course, mention the daunting plethora of regulation and taxation that have put India toward the bottom of global lists in ease of doing business or starting an enterprise.

"Set against the current global economic background, even a growth rate of 5 per cent looks good, but is much lower than the ambitious standards that we set for ourselves in 2004.

"Every year, our financial system is getting better and stronger and, through this, we expect to translate our good investment to GDP ratio into a higher GDP growth rate," Chidambaram said.

Defending the foreign direct investment (FDI) policy amid scepticism by global retail giants, he said ''they always ask for more, but are expected to work within the policy framework''.

"We have a policy. Genuine investor must work within that policy. It may not be the ideal policy from his point of view. But this is the policy that we have today. You have to take it as it is," Chidambaram said.

"I am confident that one or two multi-brand retailers will enter India before the financial year is out. I think, one is just at the door step," he said, without naming anyone.

Chidambaram pointed out that the Indian growth trend for the last 21 years was caused by several microeconomic fundamentals.

"Nothing has changed on these. In fact our resolve to strengthen these fundamentals has become stronger. I believe India continues to have great prospects based on these fundamentals," he asserted.

Chidambaram said that growth slowed down in the crisis year, 2008-09, but India took the world by surprise by rebounding quickly from the slower growth of 6.7 per cent in that year to record growth rates of 8.6 per cent in 2009-10 and 9.3 per cent in 2010-11.

However, there was a further downturn in the global economy in 2011 on account of the sovereign debt crisis in Europe and the subsequent slump in the World economy, Chidambaram noted.

"We also witnessed the emergence of domestic constraints on investment and consumption. As a consequence, India's growth rate declined again to 6.2 per cent in 2011-12 and further to 5.0 per cent in 2012-13," he added.