The Hindu Business Line : PM bets on domestic demand to spur growth

Luring investors: The Prime Minister, Dr Manmohan Singh, and the Founder and Executive Chairman of World Economic Forum, Mr Klaus Schwab, at the India Economic Summit in the Capital on Sunday.

Our Bureau

New Delhi, Nov. 8 The Prime Minister, Dr Manmohan Singh, on Sunday promised the World Economic Forum’s India Economic Summit to speed up economic reforms, while announcing that the fiscal stimulus would be wound down only next year.

“Our policy will be guided by the desire to make India even more attractive for foreign direct investment (FDI). We are particularly keen to rationalise and simplify procedures so as to create an investor-friendly environment,” Dr Singh said in his inaugural address at the India Economic Summit (IES) 2009 here.

The Prime Minister also said that investments in all key infrastructure sectors would be stepped up in the coming months. This is part of a strategy to return to a higher growth trajectory of 9 per cent on the back of strong domestic demand.

Domestic demand focus

Increased emphasis will now be placed on tapping the strong domestic demand to boost economic growth as the Government is of the view that world demand will pick up “only slowly” in the wake of the global economic downturn.

Dr Singh told the gathering that the Government would make gradual but steady progress in financial sector reforms to make the sector more competitive while ensuring an efficient regulatory and oversight system.

“We need to develop long-term debt markets and to deepen corporate bond markets. This, in turn, calls for a strong insurance and pension sub-sectors. Some of the reforms needed, especially in insurance, involve legislative changes.

“We have taken initiatives in this area and will strive to build the political consensus needed for these legislative actions to be completed. We need to improve futures markets for better price discovery and regulation. We also need to remove institutional hurdles to facilitate better intermediation,” Dr Singh said.

The Prime Minister also said that the financial sector reforms are needed to ensure that the country’s financial system provided the required finance for infrastructure development.

Dr Singh said that the accumulation of FDI inflow of $121 billion since 2001-02 was not a large number given the scale of the Indian economy.

There are now clear signs of an upturn in the economy and the country is better placed than any time in the recent past to push the reform process forward, Dr Singh said. He said that the economy was expected to grow 6.5 per cent this fiscal and with a normal monsoon next year likely to achieve a growth rate of over 7 per cent in 2010-11.

Over 600 delegates, including CEOs of a number of multinational companies, are participating in IES 2009, which is being considered special as it marked the 25th anniversary of the first India Economic Summit in 1985.

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