Indian economy resilient, says PM

TOKYO: Prime Minister Dr. Manmohan Singh today said that India would emerge stronger from the current “great turbulence in the world economy”.

“The short-term outlook is somewhat cloudy but I am confident that the Indian economy has the resilience to sustain its growth momentum in the medium run. We hope to build on India’s many inherent strengths as an emerging market economy that is now ready for rapid and sustained growth,” he said addressing the Business Luncheon hosted by Nippon Keidanren in Tokyo today.

“Over the past four years, we have averaged 9% GDP growth per year. It looks like slowing down in the current year because of conditions in the global economy. But, once normalcy returns, we can and we are determined to regain the 9% growth trajectory. We have a tradition of a high rate of domestic savings averaging 35% of our GDP. This is like most Asian countries, and we also have a strong and a dynamic private sector,” he said.

Speaking on "India-Japan Economic Relations in the 21st Century", the Prime Minister said: “We meet at a time of great turbulence in the world economy. The international financial crisis, which still continues, has revealed the extra-ordinary vulnerability of the global financial system even in the industrialized world. The crisis has choked credit flows and predictably spilled over to the stock market. We have to prevent the liquidity crisis from becoming a crisis of confidence in the international monetary and financial system.”

He pointed out that the Governments and central banks of the major economies have taken strong and even innovative steps to deal with the crisis. The global nature of the crisis calls for a coordinated global response. Developing countries like India are also affected by the crisis and have to be part of the solution. “We cannot afford to risk the gains we have made in the last few years. Nor do we wish to remain vulnerable to infirmities in international surveillance, supervision and regulatory mechanisms in the future,” he said.

The government has taken several measures in India in the last few weeks to ensure adequate liquidity and confidence in our financial system. The fundamentals of Indian economy have been and continue to be strong. The country’s banking system is well capitalized. “But, we have experienced a shrinking of liquidity and we are responding by injecting additional liquidity to ensure that the rhythm of economic activity is not disrupted. The Reserve Bank of India stands ready to respond quickly to address the emerging needs of our economy,” Dr Singh said.