Basu: Optimistic

New Delhi, Feb. 25: The economy can see double-digit growth in the next three years, according to chief economic adviser Kaushik Basu.

“In the next three years, it is possible (10 per cent growth rate),” Basu told reporters, while explaining the details of the Economic Survey 2010-11, which was tabled in Parliament by finance minister Pranab Mukherjee today.

According to Basu, the growth will come from the momentum in savings and investment rates.

The survey said growth would return to the pre-global crisis level of 9 per cent during 2011-12 from 8.6 per cent in the current fiscal and 8 per cent a year ago.

Following the global financial meltdown, the growth rate had slipped to 6.8 per cent in 2008-09 from over 9 per cent in the preceding three years.

While Basu admitted that inflation would continue to be an area of concern, he explained that “inflation is a global phenomena” and as “economies grow stronger inflation increases”.

“If India continues to grow at 9 per cent over the next 20-30 years, inflation will be 1.5 per cent higher that what it was in pre-global crisis levels,” he said. In 2007-08, inflation was hovering around 3.5 per cent. “So overall per annum inflation will stand at 5 per cent.”

According to the survey, the average inflation of 9.4 per cent during April-December 2010 is the highest in 10 years. Food inflation soared to 18.32 per cent in December, before moderating to 11.05 per cent in January.

Terming current inflation as being “above average”, Basu said “we could have done better to manage food prices”.

On fiscal consolidation and a gradual withdrawal of the stimulus package, he said a careful balance needed to be struck between growth and inflation.

Referring to the impact of the unrest in West Asia, he said the crisis would not hurt the economy unless the crude prices rose to “abnormally” high levels. Oil prices in India have crossed the $100-mark for the first time in two years.

Basu sees nothing worrisome about either the slowdown in FDI or foreign funds investing heavily in the domestic stock markets and expects them to be corrected soon.

He said though foreign direct investment had been of some concern this year (FDI has been 60 per cent of the last year), “there are deals in the offing, which make me feel that FDI is going to pick up over the next year”.