India will push forward with financial reforms and needs to increase investment in rural education, health and infrastructure to lift its economic growth rate to 10 percent, Prime Minister Manmohan Singh said on Friday.
The unexpectedly strong re-election of a coalition led by Singh’s Congress party in May raised hopes of sweeping reforms in areas such as banking and fuel subsidies, but no major moves have been made apart from stake sales in some government firms.
“We need to push forward the reform process… and we will do so,” Singh told a conference in New Delhi.
“We have to create an environment conducive to growth of entrepreneurship in our urban economy. At the same time we must ensure government’s greater involvement in rural development,” Singh said.
Asked about financial reforms, Finance Minister Pranab Mukherjee said changes in labour laws and in insurance needed political consensus, not only nationally but within the ruling coalition as well.
“We shall have to converge the views within the coalition as also outside the coalition, and I am trying to arrive at that,” Mukherjee said at the same conference.
Shares of banks with insurance ventures such as SBI, ICICI Bank, Kotak Mahindra and Canara Bank outperformed the Bombay stock market, which fell close to 1 percent.
Congress and its allies won three state polls held earlier this month, which should give it more leverage to push reforms.
Prime Minister Singh, seen as pro-industry, said India’s primary challenge in the next decade was not only to sustain high growth but also ensure it was equitable.
“We should aim to sustain annual growth rate of 9-10 percent per annum,” Singh said.
Growth in Asia’s third-largest economy slowed to a six-year low of 6.7 percent in 2008/09 (April-March) from rates 9 percent or more in the previous three years.
Earlier this week, the central bank forecast growth for 2009/10 at 6 percent with an upward bias.
Mukherjee said growth was likely to pick up from the October-December quarter and hit 9 percent in the next two years.
“I would say recovery is there, but recovery is halting and slow,” he said, with any decision on removing fiscal stimulus dependent on how the economy performed towards the end of 2009.
Mukherjee said there were also inflationary worries, with annual consumer price inflation in double-digits.
The finance minister said there could be a delay of a few months in the planned introduction of a goods and services tax from next April, the start of the 2010/11 fiscal year.
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