8-10% growth can be sustained: Kelkar

Skilled labour force, rising savings to favour India

The Indian economy was poised to grow 8-10 per cent annually over the next two decades, Vijay Kelkar, adviser to the finance minister, said yesterday.

"India will emerge one of the fastest growing economies of the world in the next 20 years," Kelkar said, while inaugurating the International Insurance Congress for Developing Countries. He said the factors that favoured India were abundant and skilled labour force, a rising savings rate and the doubling of insurance business every 4-5 years.

Kelkar's statement comes in the backdrop of an 8.1 per cent gross domestic product growth forecast by the Central Statistical Organisation (CSO) for the current fiscal.

In the coming two decades, Kelkar said the country would have the largest working population in the world, which would enhance the savings rate. With an abundant workforce and financial capital, he said, "India will be among the fastest growing economies in the world."

The former finance secretary said the government was committed to initiate fiscal measures to promote the insurance sector and boost long-term savings in the economy. "The insurance industry will double every 4-5 years as the economy grows," he said.

Despite research agencies projecting a lower GDP growth next year, Kelkar said the country would move on the higher growth trajectory despite fluctuations in some years.

Credit rating agencies like Icra have predicted that the GDP growth rate may decrease to 6.4 per cent during 2004-05 despite a good monsoon and a robust growth in the manufacturing and services sectors.

"It is tempting for the government to seize upon the good news of 2003-04 and try to argue that an 8 per cent growth rate is sustainable. But that is far from being the case," Icra has said in its report 'Money & Finance', to be released soon. With good policies and an equally good implementation, the growth rate can increase to 7-7.5 per cent, it has added.

Kelkar also said the Centre would contain the fiscal deficit to 4.8 per cent of the GDP, as it expected to mop up Rs 13,500 crore from the ongoing public offerings of the government's equity in six companies.

Major institutional investors like LIC and GIC have bid heavily for the PSU shares. "We have bid for more or less 15 per cent of the public offers. In ONGC alone, we have bid for shares worth about Rs 1,000 crore. The figure would be around Rs 2,000 crore in all the companies taken together," LIC Chairman S B Mathur said. GIC chairman PC Ghosh also confirmed the corporation had heavily bid for PSU shares but declined to elaborate.

Bullish on India

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• In the next two decades the country will have the largest working population in the world and this will enhance the savings rate
• The government is committed to initiate fiscal measures to promote the insurance sector and boost long-term savings
• Despite research agencies projecting a lower GDP growth next year, the country will move on the higher growth trajectory
• Collection from the from the ongoing public offerings of the government's equity in six companies will help contain the fiscal deficit to 4.8 per cent of the GDP