India's already impressive economic growth could improve even more if it further opened its markets and relaxed government controls, according to the Organisation for Economic Co-operation and Development.
The pro-free market organisation said that while the current growth that has averaged 8.5 per over the past four years was sustainable, a rate of 10 per cent was possible if greater reforms were introduced.
"The impressive response of the Indian economy to past reforms should give policy-makers confidence that further liberalisation will deliver additional growth dividends and foster the process of pulling millions of people out of poverty," said the Paris-based group's first report on India.
The report will further fuel a broad economic and political debate in India where many have questioned whether the economic growth of the past decade has helped more than a small portion of the population. While growth has been concentrated in areas such as telecommunications and information technology, rural India has seen few benefits.
Indeed, many economists say that during that period of growth the gap between rich and poor has grown, and a recent government report said that more than 800 million people survived off 20 Indian rupees, or 25p, a day.
"This growth is meaningless if it is not inclusive," Isher Judge Ahluwalia of the Indian Council of Research in International Economic Relations told the Associated Press.
But the OECD report argues that ongoing economic liberalisation, which India began to adopt in 1991, could help to see the country double its per capita income in a decade. It said it would have taken India 55 years to double average incomes if it had stayed on the growth path experienced in the three decades following independence in 1947.
Hundreds of Western companies, including retailers such as Tesco and Wal-Mart, would love to see a reduction on restrictions which make it very difficult for them to operate here. At the moment, foreign companies require a partner holding – with a handful of exceptions – the majority stake. Retail and insurance are key areas the OECD report called to be opened up further; the Indian government has said it would raise the cap on foreign direct investment (FDI) in the insurance sector to 49 per cent from its current 26 per cent, but the move was blocked by the government's leftist partners in the ruling coalition.
"Lifting the ban on FDI in retail trading would help to improve productivity, supply chain management, reduce the exceptionally high rate of waste of agriculture produce and so lower retail prices and raise producer prices," said the report.
Meanwhile yesterday, India's main stock exchange, the Sensex, went past the 18,000 mark to reach a new intraday high, the second such record in less than a fortnight. In 2007 Indian shares have risen by more than 25 per cent.Reuse content