Higher public spending could push India back to high growth path: PM
09 Jun 2009
India can achieve an annual 8-9 per cent growth with some extra government spending and with support from the private sector, prime minister Manmohan Singh said today.
Replying to the President's address in parliament, the prime minister said there is great scope for increasing government spending, especially in upgrading infrastructure, despite the rising deficit.
It is estimated that the country needs a minimum of $500 billion for upgrading its infrastructure. He said all efforts would be made for increased investment in the infrastructure sector to boost economic growth.
Increased government spending, the prime minister said, could offset the fall in private investment. India, he said, continues to have a high savings rate of around 35 per cent and this could augur well for increasing investment, including public spending, particularly on upgrading infrastructure.
He, however, sought political support for achieving a higher rate of growth.
''If we all work together, we can achieve a growth rate of 8 to 9 per cent, even if the world economy does not improve," he said while winding up the debate on the motion of thanks to the President's address to Parliament.
India is widely expected to grow at around 7 per cent during the current fiscal (April-March 2009-10) despite the ongoing global economic crisis. The Reserve Bank of India (RBI), however, expects the economy to grow at a lower 6-6.7 per cent during the current fiscal.
The fall in growth has been mainly due to a fall in investments, mainly in the manufacturing sector.
"This year, we will maintain at least seven per cent growth rate. In the short run we cannot do better, but this is also good enough," he said.
The prime ministers' comments helped the stock market bounce back with a 461-point jump in the Bombay Stock Exchange benchmark Sensex.
The Sensex has gained nearly 90 per cent after the UP government's second coming.
Yields on government bonds rose after the prime minister said there is scope for increasing public spending despite a high fiscal deficit. Dealers said the prime minister's statement on spending has raised concerns that the final government borrowing for 2009-10 may be raised from Rs362000 crore announced in the interim budget.
