India's current economic growth - averaging 8.5 percent annually over the past four years - appears sustainable, but it can do better by opening its markets and easing government control, the Organization for Economic Cooperation and Development said Tuesday.
The Paris-based economic grouping of 30 countries gave much of the credit for India's rapid economic expansion in recent years to its government's efforts in the early 1990s to switch from a socialist-style state to a market-driven economy.
Over the past 15 years, India has significantly opened its markets to foreign competition, cut down government intervention in economic activities and liberalized policies to allow a bigger play for private capital.
As a result, "the sustainable growth rate of the (Indian) economy has reached 8.5 percent," the OECD said in its first-ever survey of India, released in New Delhi. That is the average pace at which the economy grew in the past four years.
Separately Tuesday, credit rating agency Standard & Poor's predicted 8.6 percent growth for India's gross domestic product in the current fiscal year ending March 2008.
Such economic expansion will help India double its per capita income in a decade, the OECD report 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 the country's independence in 1947, the report aid.
Still, many economists remain concerned that much of the growth is concentrated in areas like telecommunications, information technology and other services sectors - and that many Indians, especially in rural areas, have benefited little from the boom.
More than 300 million people in India still live on less than the equivalent of $1 a day.
"This growth is meaningless if it is not inclusive," said Isher Judge Ahluwalia, who heads the Indian Council of Research in International Economic Relations, a New Delhi-based think tank.
The Indian government says it wants the economy to grow even faster so that more people can benefit from it.
OECD Secretary General Angel Gurria said "it is possible" for India to accelerate its economic growth to 10 percent if the country moves quickly to build infrastructure, reforms its labor market and further opens up to foreign capital, especially in the financial and energy sectors that are still dominated by state-run firms.
"The impressive response of the Indian economy to past reforms should give policy makers confidence that further liberalization will deliver additional growth dividends and foster the process of pulling millions of people out of poverty," the OECD report said.
Meanwhile, foreign investors have increasingly flocked to India to seize opportunities in one of the world's fastest-growing economies. Foreign funds have already bought more than $14.5 billion in Indian stocks this year, according to Securities and Exchange Board of India.
That money, which has come on the top a record $16 billion the country received in foreign direct investment through last fiscal year, has helped Indian shares reach record highs.
On Tuesday, the Bombay Stock Exchange's 30-share Sensex rose 4.5 percent to cross 18,000 for the first time. The index has gained more than 2,000 points, or 13 percent, in just 14 trading sessions
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