CRISIL has said that it expects India to regain and sustain its pre-crisis GDP growth rate of about 9% starting in 2011, provided it hastens policy reforms in areas such as taxation, education, and foreign investment regulations
Ratings agency CRISIL Ltd has said that having emerged from the global economic crisis relatively unscathed than most other nations, India is on course to return to a pre-crisis growth rate of about 9% from 2011, if key reforms continue.
"Though not insulated from the global crisis, India proved to be less vulnerable than many first anticipated. In contrast with advanced economies, its financial sector also stayed fairly healthy. This made the country's stimulus program more effective than elsewhere and accelerated its recovery," said Dharmakirti Joshi, principal economist of CRISIL Ltd, a unit of Standard & Poor's (S&P).
"As a result, we expect India to regain and sustain its pre-crisis GDP growth rate of about 9% starting in 2011, provided it hastens policy reforms in areas such as taxation, education, and foreign investment regulations,” said Mr Joshi in a guest opinion article titled "Why India Will Continue To Gain Stature In The Global Economy" and published by S&P.
The article says that India's large, young, and growing population, the rising income of the middle class, and the country's high savings rate continue to support strong domestic demand, tempering the impact of weak export markets and other external stimuli.
CRISIL said that it believes that the country therefore has a greater opportunity than advanced economies to address its constraints and create a prosperous 'new normal' for its economy.
"Clearly, the fallout from the global crisis for advanced economies is lower growth and reduced financial leverage, each reinforcing the other. But for India, the economic environment and growth possibilities haven't changed fundamentally. The challenge before India is not merely achieving a 9% growth rate but also sustaining it," added Mr Joshi.
According to the article, realising India's potential will mean accelerating reforms to improve the investment climate, productivity, and domestic demand to offset the impact of weak performances among advanced economies.
Areas that need immediate policy action include addressing the country's high debt and deficits, improvement in infrastructure, opening the door to more foreign investment, streamlining the tax system via early implementation of a goods and services tax that would replace the existing system of indirect taxation, amending labour laws, and reforming the financial sector, the article said.