Return to 8 % GDP growth unlikely, says Ratan Tata

Ratan TataBusiness doyen Ratan Tata, chairman emeritus of Tata Sons, today told an audience in Singapore that he expects India to attain economic growth of something over 7 per cent in the next couple of years, but the country will not be able to regain the 8 per cent-plus growth it had achieved before the 2008-09 global financial crisis occurred.

Tata said the recent steps taken by the government to free up the economy have restored investors' confidence, but more needs to be done.

He noted that efforts to control inflation resulting in a tight money regime, along with scams and other issues, resulted in Indian economic growth slowing down to 5 per cent or even less.

"To many, it has been like a recession," he said during an interaction with students at the Singapore Management University (SMU).

"I think we will re-establish at 7 plus per cent growth rate in couple of years driven by the fact that we have got pent-up demand in the country. But it is not going to be as attractive as it has been in the past," said Tata, who retired as chairman of his group last year.

On the economic measures taken in the Indian union Budget for 2013-14, he said, "One must ask is it enough or is too late. My own feeling is that some of the confidence in the Indian economy, perhaps amongst investors, is restored.

"But there is a lot more that needs to be done if India is to be moving back to the visibility and the attraction that it had some years ago. Maybe just moderate moves are not going to be enough to undo the damage that has been done over the last few years."

The measures in the most recent budget "are very moderate, but perhaps signs of moving in the right direction," he told some 500 Singapore students, academics and business persons.

Tata recalled that India had enjoyed an almost a decade of considerable growth of 8 plus percentage and a very moderate inflation rate of over 4 per cent.

"In 2008-09, India stumbled," he added, referring to the global economic crisis.

Tata pointed out that India's inflation rate shot up to double-digit figures over a period of time due to rising energy and food costs, but the Reserve Bank of India's subsequent efforts to control inflation resulted in an increase in interest rates.

"We had about 13 interest rate increases in one year. And investment got held back, growth stumbled and a series of measures deprived India of the credibility that it had in term of investor confidence both from outside and inside," said Tata.

"People started to wonder whether it was the time to make new investments or to establish new capacity or hold on."