India’s Economy to Remain Stable at 7% in the Long Term

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Nov. 11 – It might be that the international financial crisis has dented growth of the Indian economy, however the slump will be short lived. A CII and PricewaterhouseCoopers (PwC) study as well as S&P's long term ratings both point to stability and continued growth over the next few years.

Recently, International ratings agency Standard and Poor’s affirmed its ‘BBB-’ long-term and ‘A-3’ short-term sovereign credit ratings on India. According to the Hindu Business Line S&P said the ratings on India reflect the country’s strong economic growth prospects and its deep Government debt market, which helps accommodate its weak fiscal position.

The report quoted S&P’s credit analyst Mr Takahira Ogawa as saying, “India’s economic prospects remain strong with growth likely to average more than 7 per cent in the medium term. Underpinning that growth is the gradual deregulation of the industrial sector, continued trade liberalisation, a dynamic service sector, and modest improvements in infrastructure.” Regarding investments in infrastructure Manmohan Singh, on a recent tour of the Middle East has been quoted as saying that India needs investments of over US$500 billion over the next five years for infrastructure development.

The report however also warned that India needs to remain prudent over its fiscal policy, external liquidity indicators and low per capita income.

The Indian economy grew at 9.6 per cent in 2006-07 and 9 per cent in 2007-08, emerging as the second fastest growing major economy in the world. Growth has been supported by market reforms, rising foreign exchange reserves, huge foreign direct investment (FDI) inflows and a flourishing capital market.

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