India has weathered economic crisis: Montek

New Delhi, Mar 19 : Deputy Chairman of India's Planning Commission Montek Singh Ahluwalia said India has weathered economic crisis and the forecast is that of growth.

He was speaking at the Asia Society's 20th Asian Corporate Conference, co-organized by The Wall Street Journal and The Confederation of Indian Industry,

Ahluwalia is tasked with presiding over India's economic transformation as it adapts to the "new normal" in the post-crisis world.

"India has withstood global crisis and has grown 7pc in 2009. The country has officially announced a goal of 9pc growth in 2010," Ahluwalia said.

During his speech, he outlined the government's plans for meeting this goal as well as other challenges that India will face in 2010.

"The Asian recovery has been difficult to ignore, and has shifted Indian focus toward regional integration. Recent policy, such as the free trade agreement between India and ASEAN, the Southeast Asian regional bloc, reflects this shift," he said.

He also remarked that while India remains open to the world at large, it will primarily focus on Asia as the region most likely to experience rapid growth.

"Within India, unofficial projections for 2010 are for 8.5 per cent, lower than the official target of 9 per cent but less pessimistic than the IMF, which forecasts 8 per cent. To meet this goal, India will have to make up for decreased external demand due to a weaker global economy."

Aluwalhia was optimistic that India would be able to post strong overall growth despite lack of export growth.

His optimism in India's post crisis projections was supported by the fact tha India's previous growth was driven in large part by domestic demand, and that lower export growth can be balanced by greater investment, especially investment into infrastructure.

"One of strengths of India's economy is its focus on "inclusive growth". For example, consumer companies have identified that during the crisis, sales in rural and small towns continued to grow."

In addition, there are numerous schemes, such as the National Rural Employment Guarantee Act (NREGA), which aims at raising land productivity, and does so more effectively than many give it credit for, he said.

"Another of India's key assets is its dynamic private sector, and the government has been increasingly effective at unleashing it. Previously, dynamism was largely targeted at avoiding controls, but freer rein in the past 10 years has proven that India has a private sector that can compete with foreign imports, and perhaps eventually make a footprint abroad."

Ahliwalia said infrastructure and public investment therefore, will be targeted at areas which are not attractive to the private sector, such as rural electrification and better roads.

"But much infrastructure does not need to be done at all by the public sector- it can be accomplished with private investment and with public-private partnerships. Such infrastructure development is possible- the most impressive example of which has been in telecommunications."

Ahluwalia downplayed the deficit, which though it remains significant, is again on its way down.

"Year by year gradual reductions of 1pc or so will put India on the road to fiscal responsibility policy. Dr. Ahluwalia pointed out that, in the old days, India's high debt-to-GDP ratio was an outlier, but that today, most countries have high debt-to-GDP ratios, and that as long as India continues to grow at 7 to 8 percent, it is safe," he said.

"India's 2010 strategy will rely on increasing foreign investment which will not only directly stimulate the economy, but in addition, will also help India cover its balance of payments deficit. As the 2nd fastest growing economy in the world, it will have less difficulty to overcome a weaker fiscal position.

"We are growing our economy and creating demand, while elsewhere there is a deficiency of growth. We are good global citizens," Ahluwalia added.