PM aims high: 9 per cent growth

New Delhi: Prime Minister Manmohan Singh on Saturday set an ambitious 9 per cent annual growth target for the economy over the next five years.

Singh told a meeting of top policy makers and Chief Ministers of 25 states that the economy must accelerate expand faster in order to substantially reduce poverty in the country.

The meeting was called to discuss a five-year strategy to accelerate India's economic expansion from 8 percent a year now to annual average of 9 percent over the next five years.

''This is ambitious but feasible,'' Singh said. ''There are major constraints that we have to overcome, many of which require difficult policy changes by the Central government and the state government.''

Singh said boosting productivity in agriculture and channelling more investment into infrastructure projects would hold the key to accelerating the expansion of the broader economy in the coming years.

Over the next five years, he said, the government's priority will be to address the agriculture sector and come out with a policy that will create more employment.

''We need to think creatively in these areas and not be afraid to break from past practices.''

The country’s economy averaged a little over 8 percent economic growth over the past three years, but most of income gains have benefited the country's 300 million-odd middle class, people mostly living in cities.

Nearly 400 million people in the country still live on less than a dollar day, most of them earning their livelihood from farming.

The economy is already showing signs of acceleration, growing 9.1 percent in the first half of the current fiscal year ending in March 2007, but there are concerns about higher inflation and overheating that may hit the poor the hardest.

Late Friday, the Reserve Bank of India asked banks to increase their cash balances by 50 basis points in two phases effective December 23 and January 6 _ a move that would help suck out Rs 135 billion from the system and rein in inflation.

The inflation rate has hovered around 5.5 percent in recent weeks.

The increase in cash reserve ratio announced by the Reserve Bank of India is also expected to result in an increase in interest rates and curb unbridled growth in credit flows.