India can sustain 9% growth through high savings, investment rate

New Delhi, Feb 6 (UNI) Finance Minister P Chidambaram today said that combination of fiscal prudence, high saving and investement rate will continue to propel the economy to nine per cent growth in future.

''We have to do right things and avoid doing the wrong things...

Ensure that people save and invest and there is enabling environment for investors, both domestic and foreign,'' Mr Chidambaram said in an interview to BBC.

The implication of the Finance Minister's statement is that high growth can be sustained notwithstanding the impending recession of the United States economy.

It meant that recent high growth was a resul of high domestic savings and investment rate, which needs to be sustained by creating a right policy framework and investor friendly climate.

Mr Chidambaram said that the country will have to ensure that investments are made across diverse sectors as well as managed well to make them effective instruments of growth.

''If these principles are observed, I do not think it is difficult in India to sustain a growth of no less than 8 per cent, pushing 9 per cent, and aiming to go beyond,'' Mr Chidambaram said.

The Finance Minister said the biggest challenge was to ensure that the economy grows at a rate of eight per cent plus every year.

Mr Chidambaram explained as to why China attracts higher doses of FDI than India.

He said that the FDI flows depend upon the absorbtive capacity of the economy which in turn depends upon removing the clutches on various sectors.

The Finance Minister is of the view that FDI inflows have been consistantly on the rise and this connection noted that they were higher by 50 per cent in current fiscal as compared to the previous one.

Mr Chidambaram allayed the fears that the country's current account deficit was running out of proportion and noted that the CAD stood at a modest rate of 1.3 per cent of GDP.

He said India needs still higher proportions of FDI to spur industrial and economic growth.

UNI MP/GS PDT HT2135