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India can 'recapture the magic' of high growth

Indian sari vendors share a light moment in the Old Quarters in New Delhi on January 30, 2013. India's economy should return to a high-growth path of seven to eight percent in the next couple of years, picking up from decade-low expansion, the finance minister said on Saturday.

India's economy can "recapture the magic" and return to high-growth of seven-to-eight percent in the next couple of years, picking up from decade-low expansion, the finance minister said on Saturday.

Earlier in the week, India's Central Statistics Office (CSO) had projected that Asia's third-largest economy will accelerate by five percent in the fiscal year ending in March -- its slowest rate in 10 years.

"There are signs of an upturn that will take us to a high growth path," Finance Minister P. Chidambaram told reporters.

"We will climb back to a growth rate of between six to seven percent next year and then between seven-and-eight percent in the year after," he said.

"We can recapture the magic of 2004-08. The average growth was 8.5 percent during that period," he said.

The finance minister disputed the CSO's growth estimate of five percent for the current financial year as too low.

"We believe growth will be closer to 5.5 percent," Chidambaram said, as he unveiled a scheme to draw more investors into India's growing stock market.

The International Monetary Fund last week forecast India's economy would post growth of 5.4 percent in the financial year ending in March.

Last year, the economy grew by 6.2 percent but even that rate, while enviable by anaemic Western standards, is insufficient to create the jobs India needs to provide work for its ballooning population.

An eight percent growth rate is imperative to generate jobs, Chidambaram said.

"The measures we have taken... and will take in the coming days will put India onto the eight percent path," said the minister, who is due to present the budget for the coming financial year at the end of the month.

The Congress-led coalition government has introduced a string of measures since September to encourage foreign investment in key sectors and reduce subsidies, which have led to a ballooning fiscal deficit.

India's economy has slowed sharply due to high interest rates, Europe's debt crisis and sluggish investment caused by domestic and overseas concerns about policy-making and corruption.

On a positive note, Chidambaram said the CSO's growth forecast was higher than a decade ago in 2002-03 when the economy grew at four percent.

"I have no doubt in my mind that we will come out of this trough," he said.

As India gears up for national elections due in 2014, the government is under increasing pressure to kick-start the economy before facing voters.