In his recent visit to India, US President Barack Obama, openly lauded the Indian people for their grit and determination in turning around an economy, which at the time of its independence had been backward and sluggish. The US President during his address to MPs from both Houses of Parliament said, "Instead of resisting the global economy, you became one of its engines - reforming the licensing raj and unleashing a classes,".
Even as the shadow of recession looms over other parts of the globe, the Indian economy has in fact proven to sustain its pace of growth. Its huge consumer base even serving to add a ray of hope to other badly hit economies.
So how exactly did the giant elephant fair in the year 2010?
Not bad! As per the reports of CRISIL Research, India's gross domestic product (GDP) is likely to grow by 8.6 per cent in 2010-11. In its recently released report titled 'India: Raising the bar' (Jan 2, 2011), the leading credit rating agency, projected an average annual growth of 8.4 per cent in India’s gross domestic product (GDP) over the next five years.
In February’s Economic Survey, the finance ministry, Pranab Mukerjee had projected 8.5% growth for 2010-11. In December 2010 the figure was revised to 8.75%, with the possibility that it could reach the 9% mark. While chances of the growth rate being affected by Europe’s prevailing economic woes still exist, another looming threat is the steep rice in food prices.
Economists believe that the key factor spurring India’s steady growth seems to be its growing domestic demand – driven by a growing young population, rising middle-class consumption and increasing investment and savings. “Private consumption is becoming the primary engine of growth,” said D.K. Joshi, Chief Economist at CRISIL Research.
FDI inflows in India up to September 2010 stood at USD 15.973 mn, a significant 26% lesser than the previous year’s figures. A major chunk of the investment (21%) was towards the services sector (financial and non-financial), followed by computer software and hardware (9%), and telecommunications (8%). The state of Maharashtra (Mumbai) received the lion’s share of the FDI (36%), followed by Delhi (20%) and Karnataka (7%).
The CRISIL report significantly highlighted that India in fact had the potential to reach a double digit growth rate. However for these structural reforms in infrastructure, agriculture and education and increased private sector participation would be a must.