India's economy is expected to grow more than 9 percent in the current fiscal year ending on March 31 but further rapid expansion is needed to reduce poverty, Prime Minister Manmohan Singh said on Thursday.
Asia's fourth-largest economy expanded an average 8.3 percent in the last three years and the government has estimated a growth of 9.2 percent in 2006/07, powered by industry and services.
The government wants higher growth to help spread wealth among the country's 260 million poor that make up a fourth of the population. "I have this belief... the problems of mass poverty, ignorance, disease which affects large segments of our population can best be dealt with only in the frame of a rapidly expanding economy," Singh told lawmakers in parliament.
Singh also said recent measures to rein in prices would moderate inflationary pressures in the coming months. Separately, he said state-run companies would benefit if they were listed on stock exchanges and had independent directors.
Inflation hit a more than two-year high of 6.73 percent in early February, but has since slowed after a series of measures taken by the government and the central bank. "Already there are indications that the rate of inflation has declined by nearly one percentage point in the last two weeks," Singh said.
Analysts polled by Reuters on Thursday estimated inflation at just over 6 percent for the 12 months to February 24, above a central bank forecast of 5-5.5 percent by end-March. The data is due on Friday.
Voters' anger over rising food prices was a big factor for the defeat of the Congress party, which heads the federal coalition, in local elections in two northern states recently, analysts say. Last week, the government cut duties on most non-farm goods in its budget for 2007/08 to cool prices. Earlier, it had lowered import duty on many items including cement and steel and reduced fuel prices to fight inflation.
India's central bank has also stepped up the pace of monetary tightening to help douse price pressures. However, analysts have said India needs to raise its farm output to meet rising demand and help contain runaway prices. Singh said agricultural growth was not satisfactory and the government wanted greater emphasis to expand the area under irrigation.
Farm output is estimated to grow just 2.7 percent in 2006/07, largely because of heavy reliance on monsoon rains for irrigation and little productivity gains over the last few years. Singh said the government must evolve a strategy to increase production of grains, edible oils and pulses. The prime minister said the government was working towards limiting the role of administrative ministries in the day-to-day functioning of state-run companies.
"I hope the steps we intend to take will help our public enterprises to become more globally competitive," Singh said. India has more than 240 state-run firms manufacturing everything from condoms to steel and their functioning is closely monitored by various ministries. Singh also said state firms must become more aggressive to grab business opportunities in a globalise economy. A listing on stock exchanges and independent directors would also help.
"Induction of independent directors on the boards of public sector enterprises would ensure greater efficiency and effectiveness in decision making," Singh told a meeting of chief executives of state-run enterprises. Communist allies of the ruling coalition have stalled attempts to sell assets in public sector companies.
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