India's economy to grow 7.5pc in 2005

Prime Minister Manmohan Singh said his government was giving a big push to agriculture, which has been a drag on the broader economy and kept India from catching up to economic rival China.

Although industry and services have been growing at more than 8 percent in recent years, overall economic growth has averaged around 7 per cent because of sluggish expansion in farm output. Singh said he expected the economy to expand 7.5 per cent in the current fiscal year ending march 2006.

"We should be targeting a 10 per cent growth rate in two to three years’ time,” Singh told a meeting of business leaders from around the world who gathered here to explore opportunities in one of the world’s fastest growing economies. "In my view, this is eminently feasible.”

His comments came a day India’s stock market set a new high, driven by foreign funds which have pumped a record $8.5 billion (û7.2 billion) into Indian shares. On Monday, the 30-share benchmark index of the Bombay Stock Exchange — the Sensex — crossed 9,000 points for the first time Monday and closed at 9,005.

Overseas investors are increasingly looking to invest in India, which is increasingly liberalizing its economy, and Singh assured the business leaders that his government would continue with market opening policies.

Several delegates to the meeting hosted by the Geneva-based World Economic Forum said India’s economic growth could surpass China in the coming years if the country moved fast to improve its infrastructure and remove bottlenecks to foreign investment.

"We could see India averaging a higher growth rate than China in some years from now,” said Jean-Daniel Gerber, Switzerland’s state secretary for economic affairs.

Willem Brocker, a global managing partner with consultancy firm PricewaterhouseCoopers, said India’s young workforce gives it an edge over China where the working population is aging — a result of the communist country’s decades-old "one child” policy. Still, India attracts only a fraction of what China gets in foreign direct investment, although many global agencies say the potential return on capital could be higher in India