The government can raise funds through selling up to 49 percent of state-run firms, the deputy chairman of the Planning Commission said on Monday, adding the economic outlook had improved over the past three months.

Last month's re-election of the Congress-led coalition has raised hopes that it will push ahead with stalled economic reforms, including asset sales, which were stymied by their Communist allies in the previous government.

"To my mind commitment to retain public sector units within the public sector only requires that 51 percent of the equity will be held by the government," Montek Singh Ahluwalia told a news conference.

"So there can really be no objection whatsoever to disinvesting up to 51 percent," he said.

Last week, President Pratibha Patil said the government would take steps to encourage foreign investment inflows, list shares of state-run firms and infuse more capital in banks to help boost economic growth.

"There is a lot of scope for raising resources," Ahluwalia said.

Analysts say funds raised from asset sales could help fund the fiscal deficit, which the government estimates will be 5.5 percent of gross domestic product in 2009/10.

Ahluwalia also said there was a need to limit subsidy costs. The government subsidises the costs of fuel, fertilisers and some food items through the issue of special bonds which it does not include in its deficit calculations.

"Clearly, it has been the general position of the government that subsidies should be limited to what we can afford and should be targetted. So both the issues are important," he said.

Ahluwalia said the economic situation was much more favourable now than it was three months ago, and India could maintain or improve upon 2008/09's GDP growth of 6.7 percent, which was the slowest in six years.

"From what I can see, we should be at least aiming at the same growth that we achieved last year. I would think we could do a little better," he said. "Now a lot depends on how the global economy behaves in the second half of this year, when everybody expects that the sharp downturn is coming to an end," Ahluwalia said.

Asia's third largest economy grew at 9 percent or more in the three years ending 2007/08.

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