Economy may grow by 6.5-7% this fiscal: FM

Finance Minister P Chidambaram has said the Indian economy is expected to grow by 6.5-7 per cent this fiscal despite delayed monsoons and oil price pressures.

"Along with China and emerging Asia, India is poised to become a major driver of global growth in the medium term," he said, adding, "despite a delayed monsoon and oil price pressures, the economy is expected to grow in the range of 6.5-7 per cent this year."

Chidambaram was addressing the ministerial-level International Monetary and Finance Committee (IMFC).

He said "the key to growth is enhanced investment "" public and private, domestic and foreign". With the economy already showing signs of high growth, "a strong revival of investment demand and business confidence is evident," he added.

Asserting that the United Progressive Alliance (UPA) government was committed to carry forward reforms with a human face with a focus on health, education and employment, he said, "India has pursued its own design of domestic economic reforms since the early 1990s, duly incorporating the impact of domestic political cycles."

Fiscal consolidation (reduction of fiscal and revenue deficits) remained high on the agenda, Chidambaram said, adding, the new government had demonstrated its commitment by notifying the Fiscal Responsibility and Budget Management Act and the detailed rules for its implementation in July.

The external position had added to overall confidence and the country's credit standing had improved in international markets, he said.

"The government is committed to promoting multilateral trade liberalisation policies in the spirit of the Doha Round," Chidambaram said and added that India had liberalised its external sector.

Admitting that the current outlook for oil prices has made macroeconomic management in India very complex, he said, "Monetary policy will continue to emphasise on price stability with growth."

An enduring solution to these problems was the strengthening of cooperation between oil importing and exporting countries to stabilise the market and for international financial institutions to stand ready to support countries vulnerable to potential shocks, he said.

"Measures to constrain demand would include enhancing efficiency in the use of energy, in particular in growing emerging economies including India, and tapping alternative sources of energy," he said.

Compared to earlier oil price shocks, he said countries have become more resilient through the pursuit of sound macroeconomic policies.

The economic outlook and policy prospects to meet emerging challenges now appeared more positive than it did at the last IMFC meeting in April, he said.

"A heartening feature of the recovery is its broad base across the membership and in an integrated global economy, such broad-based expansion enables each region to strengthen the prospects of the other," he said.