India will find it tough to sustain growth rates of more than seven per cent annually, former Union finance minister Manmohan Singh forecast yesterday.
India has the potential to grow at 10 per cent. But it does not have the capacity to tolerate high inflation, Singh said while delivering the Jawaharlal Nehru Memorial Lecture here.
Six per cent to seven per cent is probably a realistic target, Singh told the audience which included Britains former Chancellor of the Exchequer Kenneth Clarke.
Singh outlined the achievements and failures of Indias economy in the last 50 years during a one-hour address that won a standing ovation from a jampacked hall at Londons Institute of Directors.
Singh said that India will need to turn itself into a trading nation like Japan and Korea if it wants to become an economic powerhouse.
On a per capita basis India is not well endowed with natural resources. It will have to become a trading nation, Singh said.
The former finance minister suggested that India will have to attract multinationals which will use the country as a production base for international operations. This is one way it could attain the goal of becoming a trading nation.
Indias share of world trade could expand from 0.7 per cent to around 4 per cent in the future if the economy is managed soundly, Singh predicted.
Singh defended economic liberalisation saying, The fear of de-industrialisation of India has turned out to be unfounded. There is no evidence that the country is flooded with unwanted imports.
He added that Indias economic fundamentals are strong and it does not have the weaknesses of other South-East Asian countries.
We have been conservatively managed. What has happened in Thailand cannot happen in India, he said.
Singh said it had been tough to push through an economic reforms programme because quick results were needed. It is difficult to sustain an austerity programme in a democracy. Our measures had to have an immediate effect.
Discussing his own role in masterminding economic reforms, Singh said: I was left in no doubt that I would be the scapegoat if the programme failed.
However, he said that expectations have changed dramatically. Six per cent growth is considered a recession. That is an indication of the changed mindset, he said.
But he admitted that reforms still have a long way to go. The depth and speed of reforms did not proceed according to schedule. There was a weakening of political will, as the sense of crisis disappeared.
Singh praised Jawaharlal Nehrus efforts to push Indias economy in the right direction. However, he said that, by the mid-sixties overcentralisation and overbureaucratisation became obvious.
Singh declined to predict how Indias present political crisis will end.
I am not an astrologer, he told a questioner.India has the potential to grow at 10 per cent. But it does not have the capacity to tolerate high inflation. Manmohan Singh, Union finance minister
