Vajpayee targets high growth for India


Vajpayee noted that India must cut red tape and push ahead with reforms if it wants to draw overseas capital

By staff and wire reports

NEW DELHI, India -- Prime Minister Atal Behari Vajpayee predicted over the weekend that India's gross domestic product could grow eight percent a year for the next five years.

India's GDP rose 5.4 percent in the business year ended in March. But the government is forecasting growth of between 6 percent and 6.5 percent this year.

Vajpayee said India has set itself an "ambitious target" of 8 percent growth for its five year plan running through 2007.

"Is this (8 percent target) achievable? Yes. I have no doubt about it," Vajpayee told his Economic Advisory Council on Saturday, according to Reuters news service.

The leader noted that India's service sector makes up half its GDP and has grown 8.5 percent a year for the last seven years.

PM: India needs to cut red tape

That came ahead of the release of China's gross domestic product figures for the first half of 2002 on Monday. They confirmed China is still outpacing India, though the two nations have similarly large populations.

Vajpayee told the group that India needs to cut red tape and find ways of generating growth that leads to jobs. The council comprises the chief of the central bank and eminent economists.

The prime minister said that India has been one of the six-fastest growing economies over the last two decades.

Vajpayee said India will this week drive through labor-law reforms and accelerate the government's 10-year-old privatization push.

Second challenge: speeding reforms

The first challenge is to encourage growth. But he said additional measures are necessary for India to attract overseas capital, he said.

"The second challenge is to further speed up economic reforms so that India becomes a clear-cut market economy with the government withdrawing from production, barring a few clearly specified strategic sectors," he added.

India also needs to reduce its fiscal deficit by making people pay for what they use, barring poor people who merit subsidies and protected social services, he added.

China is the fastest growing economy in Asia. China's government said on Monday that its economy grew 7.8 percent for the first half of 2002.

India has generally lost out in the fight for overseas capital to China. Multinationals have faulted India's layers of bureaucracy for discouraging international investment.

India's military and political tensions with Pakistan have not encouraged trade in the region. Both countries condemned the weekend's attack in Indian Kashmir, that saw suspected militants kill 27 people (full story).

Indian software maker Infosys said not one overseas client came to its Bangalore headquarters in June. The company plans a disaster recovery center in Canada or Singapore (full story).

Doubts about reform program

At the same time Vajpayee vowed to push forward, there are doubts about the extent of reform in India and the country's privatization program.

Asim Dasgupta, the finance minister of West Bengal, called for a review of India's 11-year old reform program.

Dasgupta believes the reform program has broken from its original goals. Demand is falling in India because local companies have lost market share, as India liberalizes its business system.

Rising joblessness means farmers are getting less for their produce, he said. Dasgupta said India must push the World Trade Organization for a new 10-year period for the country to prepare for pulling down trade barriers.