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NEW DELHI, INDIA: India's economy could grow by 10 per cent a year by 2012 with the right set of policies, but the US subprime crisis might trim exports and capital flows, stated prime minister Manmohan Singh today.
The Indian economy grew 9.4 per cent in the last fiscal year, its strongest in 18 years. Its surging expansion has attracted global investors, fuelling a stock market boom and pushing firms to expand capacity.
"This high growth rate has become possible because of the historically high savings and investment rates which we are witnessing," Singh said at a meeting of the National Development Council set to approve policies for the five years to 2012.
In the September quarter annual growth dipped below 9 per cent for the first time in three quarters, as industrial output slowed due to monetary tightening designed to trim inflation.
Singh said that global credit worries would not completely skirt India's economy, despite it being largely driven by domestic demand.
"There are some clouds on global financial markets following the subprime lending crisis. There are worries that the growth of the U.S. and other leading economies may slow down and some may even go into a recession," he said.
"This may impact both our exports as well as capital flows."
Such concerns mean India must redouble efforts to maintain domestic drivers of growth, said Singh.
The government is discussing ways to minimize the impact of the rupee's appreciation on exporters, who have seen their margins squeezed by a 12 per cent rise in the currency this year.
© Reuters
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