Upbeat on economic fundamentals, Finance Minister Pranab Mukherjee today said India will cross growth projections of 8.75 per cent this fiscal, but cautioned that infrastructure posed a challenge to bigger expansion.
"I am optimistic that at the end of this year we will be able to surpass our GDP growth forecast of 8.5-8.75 per cent," Mukherjee said at a meeting of the Indo-German Joint Commission on Industrial and Economic Cooperation.
However, he added that infrastructure bottlenecks may be a challenge to 9-10 per cent growth and invited German companies to take part in the public-private-partnership model to expand core sector industries. Mukherjee's optimism on growth was shared by economists.
"We are on advantageous position because of the lower base of last year. This coupled with good agriculture output (mainly wheat and pulses) and rural demand would boost economic growth," said Religare Capital Markets chief economist Jay Shankar.
He said industrial growth is also expected to be higher in the coming quarters and help India achieve over 8.5 per cent growth in the current fiscal.
On whether India could achieve over 8.75 per cent growth, Shankar said, "I am optimistic" Mukherjee said the economy registered 7.4 per cent growth in 2009-10, driven by the robust performance of manufacturing sector on the back of government and consumer spending.
For the first quarter of this fiscal, the economy grew by 8.8 per cent growth. On the constraints to the big growth, the Finance Minister said, "Our infrastructure has lagged behind acceleration in growth, and presents a challenge. We need much more investment in sectors such as power, railways, ports and aviation."
Inviting German companies to invest in India, he said, "We have ambitious programme of investment in these areas to meet the deficit. The PPP model should offer attractive growth opportunity for German investors."
Delhi-Mumbai national corridor and Chennai-Bangalore industrial clusters offer new avenues for foreign investors, he added.
The Finance Minister said rising demand for energy has begun to be another important challenge for economic growth. "Energy availability is critical to attain 9-10 per cent growth rate as one per cent growth needed 0.8 per cent increase in energy availability," Mukherjee said.
He said India has a target of 30,000 mw of power from renewable energy including 20,000 mw from solar power by 2022, and invited German companies to collaborate in these areas.
Prime Minister Manmohan Singh has asked the plan panel to upgrade the target of investment in infrastructure to $1 trillion in the 12th Five year plan (2012-17), against $500 billion in the current plan.
Image: Pranab Mukherjee
