India can outgrow China by 2014, says new chief economist Kaushik Basu

India could surpass China's economic growth rate sooner than most people expect, most probably by 2014, the newly appointed chief economic advisor in the finance ministry Kaushik Basu said on Monday. He also saw the economy bouncing back to 9 per cent growth next fiscal, while expansion this year would be over 7.5 per cent.

India's largely young population will help raise its savings rate to over 40 per cent of GDP from 38 per cent, thereby hastening growth, Basu said. ''The high savings rate will trigger a period of sustained economic expansion. Savings rates are unlike stock market indices. Once you are there, you don't fluctuate,'' he said.

Speaking on the sidelines of a FICCI seminar in New Delhi, Basu said the economy will grow at over 7.5 per cent in the current fiscal on the back of the stronger growth projected in the fourth quarter. The economy grew 7.9 per cent in the July-September quarter, higher than 6.1 per cent in the preceding quarter.

Basu also said India does not need to tighten monetary policy now and risk stalling a nascent economic recovery, as inflation is mainly being caused by high food prices. "Right now, there is no expectation of monetary tightening, and nor do I believe there is a reason for this," he said.

"You don't want to have an effect across the board, which increases unemployment, which holds back the growth rate," he said, adding inflation would "peter out" over a few months.

"Right now, it is a sector-specific intervention that is needed, which is in food sector and that is what the government is doing," the former Cornell University professor said.