Prime Minister Manmohan Singh is confident India's rapidly expanding economy is not facing slower growth despite being hit by a patchy monsoon and soaring inflation.
However, he conceded at the weekend that short-term growth could be impacted by high inflation fuelled by an uptick in oil prices despite strong performances in the industrial and services sectors.
Singh, an economist, has targeted 7.0-8.0 percent gross domestic product growth for the next decade, supported by a pickup in industrial and agricultural output.
Analysts, however, have already trimmed growth forecasts for the Asian giant to 5.5-6.5 percent from 7.0-8.0 percent for the financial year ending in March 2005.
Economists say the "dream team" of Singh and Finance Minister Palaniappan Chidambaram, seen as staunch economic reformers, will have their work cut out for them to ensure the damage from inflation does not worsen.
"There is no indication that there is any deceleration in the overall growth of the Indian economy," Singh told his first press conference on Saturday since taking office on May 22. "The short-term economic scenario has worked out in a manner we would not have liked it to go. Inflation has caused some concern. But despite increasing world oil prices, delayed monsoons... we shall be able to control inflationary pressures without hurting the growth process," he said.
"We have adequate stocks of food grain, adequate stocks of foreign exchange. The industrial growth for this year has been much better (than last year) and the export growth has also been much better."
Oil prices have spiralled in India, which imports 70 percent of its crude needs, helping push up inflation which hit a three-and-a-half-year high of 8.17 percent in the week ending August 21.
"It's too early to asses the impact of the monsoon on growth," said Naresh Nagrajan of the Academy of Business Studies. "Agriculture production depends not only on overall rainfall but also on distribution over time and regions."
Singh acknowledged, however, that India needed "large doses" of foreign investment to sustain growth and said the government would try to convince his communist allies on the issue.
The Communist Party of India, which is providing crucial outside support to the government, has attacked the government's proposal to hike foreign direct investment limits in the key telecoms, insurance and aviation sectors.
"Public Sector Undertakings and nationalised banks will be encouraged to enter the capital market to raise resources and offer new investment avenues to retail investors," said Singh.
"If there are profit-making enterprises that make reasonable profits in competitive conditions there is no earthshaking reason for privatisation. "I am sorry to say, the so called 'dream team' of economists have failed to do anything worthwhile and the economy is out of their grip," said Sinha.
"Their good intentions remain just that as their hands are tied."