Will focus on infrastructure, inclusive growth: Montek Singh

On Thursday afternoon 15th Sept 2011 at an exclusive event, organised by the European Business Group at Hotel Imperial Delhi, Planning Commission, Deputy Chairman Montek Singh Ahluwalia took the podium to deliver an address on "Managing High Growth and Inflation" .

Interspersing it with anecdotes he spoke on three critical issues , inflation ,inclusive growth, infrastructure development. He stated that the Indian economy is mostly driven by domestic factors and markets and will stabilise in the short-run, despite the recent meltdown on account of the US downgrade. "There is no doubt that inflation not just in India but in most emerging markets has become a bit of a problem, that is why policies have been tightened everywhere. I want to see them incidentally that a bit of the tightening on the short term interest rate makes a big difference for long term interest rates and expectations. So I think a slight tightening of the interest rates will make a credit little bit more expensive. But I think what drives investment more, is the sense of whether the world is returning to normal, whether the investment opportunities are perceived to be good and I think more than that whether inflation is perceived to be coming down"'. The Planning Commission Deputy Chairman also said that the country's economic growth this fiscal would be around 8 per cent, lower than the 8.5 per cent achieved in 2010-11.

"The high growth of Indian economy is largely driven by internal factors. I feel the market will stabilise in the short-run. I don't expect to see a big negative impact but we have to watch the situation," Ahluwalia said. The impact on India depends on what happens in the world. If there is financial instability (globally), there will be some impact," he added.

He further said the downgrade of the US' long-term sovereign ratings by S&P -- which has happened for the first time since 1917 when the US was first given a rating – was not unexpected.

"The S&P downgrade of the US debt was in some sense expected because fiscal unsustainability issue of the US has been known for some time. There are similar problems in many European countries," “India is the third largest economy after the US and China in terms of Gross Domestic Product (GDP) and it can achieve the growth rate of 9 percent,” adding that the annual growth rate of agriculture is projected at 4 percent in the approach paper of the 12th Plan.

The Prime Minister’s top aide  said that development of infrastructure will play key role in the Nation’s effort to achieve a target of 9% growth during 12th Plan and  stressed on the need for greater public investment and public-private partnerships for infrastructure development.. The Planning Commission estimates an investment requirement of $1 trillion for the infrastructure sector. It hopes that nearly 50 per cent of the requirement will come from the private sector alone.

Mindful of global uncertainty affecting fund inflows, Mr Ahluwalia believed that we should not be grim about it. He hoped that as soon as the global situation improves, funds are certain to flow in.