Chidambaram counters IMF forecast, says celebrate Indian growth

April 11th, 2008 - 4:45 pm ICT by admin  

By Dipankar De Sarkar
London, April 11 (IANS) Finance Minister Palaniappan Chidambaram has countered International Monetary Fund (IMF) forecasts about India’s growth rate, saying the country is likely to register over eight percent growth for 2008-09. India was continuing on a trajectory that was a cause to “celebrate”, he said. Addressing a gathering at the launch of the British branch of the India Infrastructure Finance Company (IIFC), an offshore lending arm of the government, Chidambaram said Thursday he was confident that India would end 2007-08 “pretty close” to the post-2004 yearly average of 8.8 percent growth.

For 2008-09, he said assessments by a number of financial institutions, including the IMF, had pointed to the likelihood of a decline in world output while the Bank of England had predicted a marginal slowing down of the British economy.

“But I’m confident that in India we are confident we can still register a growth rate of over eight percent.

“That will still keep us in the second spot as far as rapidly growing economies are concerned,” he said.

The IMF, in its forecast released Thursday, said lower demand for Indian exports and higher financing costs will lead to the growth rate slowing to 7.9 percent in 2008-09. In its latest World Economic Outlook, the fund said GDP growth in 2009 would be eight percent.

Chidambaram said the fact that India has problems related to infrastructure supply should make it “concerned…but (it) should not be despondent”.

“We should celebrate because in a way it is a celebration of India’s growth story,” he added.

The finance minister said India grew at 3.5 percent in the first 30 years after independence and at 5.5 percent in the 1980s and 90s.

“If India was growing at about four or five percent a year, we would not need an IIFC. No one would complain about India’s infrastructure. But India’s very rapid growth rate in the last four years has exposed weaknesses in India’s infrastructure,” he said.

India Infrastructure Finance Company (UK) Ltd, an off-shore subsidiary of IIFCL, has been created to borrow funds from the Reserve Bank of India’s (RBI) forex reserves and lend to Indian companies implementing infrastructure projects in India.

According to Planning Commission projections, the Indian infrastructure sector will need funds of around $492 billion over the next five years, rising to $1.48 trillion in the next five years.

IIFC (UK) will help Indian companies import capital goods in sectors such as power, airports, ports and roads, limiting lending to capital expenditure outside India.

Since its creation in January 2006, IIFCL, a wholly owned government enterprise, has approved 78 infrastructure projects with a loan commitment of over $4.25 billion. These involve an aggregate project cost of over $32 billion.

IIFCL provides debt of long-term maturity of over 10 years to public sector and public private partnerships.

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