Indian Economic System To Grow At 10% - Lehman Report

India Economy GrowthNew Delhi: In a recent report titled “India: Everything to play for”, Global investment bank Lehman Brothers has stated that Indian economic system will develop at 10% over the next ten years, if it carry on with structural reformations including deregulated labour market, liberalise investment rules and keeps government spending under control.

“It has the potential to raise its economic growth rate to 10 percent or so over the next decade. In realising that goal, continued structural reforms and prudent macro policies will be critical,” the report said.

The report said that the labor efficiency and structural modifications in the business sector were main growth drivers in recent years.

In the last four years, India’s economic system has grown an average of 8.6 percent. Lehman anticipates the economy to develop 8.8 percent in the recent fiscal and 9.2 percent in the year afterward.

The report also showed that several features revealed by Asia’s third-biggest financial system resembled those in other rising Asian countries during their early stages of economic take-off.

These comprised rising incomes, an increasingly open financial system and stable macroeconomic conditions exciting demand and investments.

The report said that reforms including easing foreign direct investment rules and labour market deregulation, plus fiscal consolidation and improved infrastructure, were required in order to pick up growth to an advanced level.

Lehman said the nation should also revive its privatisation programme.

“A key reform would be reducing the dominance of public sector banks,” the report said.

The report said that a rapid worldwide economic slump is a danger to Indian economy in the coming future, even if it was not as reliant on exports as other Asian economic systems.

“While India is one of the least vulnerable economies, it is not immune,” it said.

Lehman also told that it could not exclude a period when demand could surpass supply in India, raising risks of overheating.

The RBI has raised its temporary lending rate five times between June 2006 and March in an effort to chill demand forces and test out inflation. It has also increased banks' reserve demands by 200 basis points since December to restrain excess cash from the banking industry.

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