GDP will grow 8.4 pc in next 5 yrs: Crisil
New Delhi: Strong domestic demand will enable the Indian economy to register an average annual growth of 8.4 per cent during next five fiscals, Ratings firm Crisil said on Tuesday.
Crisil said the Indian economy faced five key constraints which if addressed would accelerate growth to 10 per cent annually on a sustained basis.
These involved quantity and quality of physical infrastructure, skill shortages among the workforce, faltering agriculture and high food inflation, less spending on health, education and physical infrastructure, and a governance deficit.
"The inherent strength of India`s domestic demand will enable it to maintain 8.4 per cent annual growth over the next five years (2011-12 to 2015-16)," Crisil said in its report `India-Raising the Growth Bar`.
The report comes at a time when the Indian economy clocked 8.9 per cent growth during the first half of the current fiscal.
Spurred by better-than-expected growth, the government had in its mid-year economic review in December revised upward its forecast for economic expansion in 2010-11 to 8.75 per cent, plus or minus 0.35 per cent, from the earlier estimate of 8.5 per cent.
The Indian economy grew by 7.4 per cent in the last fiscal, showing recovery from the global economic downturn.
It had grown by an average of above 9 per cent for three fiscals before global recession plunged the growth rate to 6.7 per cent in 2008-09.
The report said an increase in discretionary spending by middle class households will boost demand for durables like automobiles and white goods, and services like hotels, restaurants, and tourism.
Financial services such as consumer finance, asset management and insurance will grow briskly to cater to the needs of a growing middle class with increasing disposable income, it added.
The growing income of the middle class segment, which already numbers over 30 crore, will also propel demand for healthcare and education services, particularly in the private sector.
"Domestic demand, spurred by a large growing young population, and robust consumption and investment rates, will support 8.4 per cent economic growth over the next five years," Crisil Managing Director and CEO Roopa Kudva said.
"The Indian economy is not demand-constrained. Rather, it is the supply-side issues that limit the growth prospects," Crisil said.