Opposition says Indian PM in denial over economy

Premier Manmohan Singh forecast on Saturday stronger growth for India's stumbling economy, prompting opposition charges that the 79-year-old leader was in "denial" mode.

Singh said he expected Asia's third-largest economy to expand this year by more than last year's 6.5 percent -- a far rosier projection than many private economists who say India could post its worst economic performance in a decade.

"The fundamentals of the Indian economy are strong. Investments and savings are among the highest in the world. I am hopeful we will do still better than 6.5 percent growth performance of last year," Singh told reporters.

Singh's comments in New Delhi came after the research arm of the global ratings agency Moody's on Thursday scaled down its growth forecast for this fiscal year ending March 2013 to 5.5 percent.

The forecast "is a cause of concern but one should not draw unwarranted conclusions", said Singh, credited with beginning the process of liberalising India's shackled economy in the early 1990s when he was the finance minister.

"We see nothing on the horizon to lift the economy from its funk," Moody's Analytics economist Glenn Levine said on Thursday.

P. Chidambaram, named finance minister last week, has pledged to restart India's "growth engine".

But analysts are sceptical about how much he can achieve with the Congress government under pressure after a string of graft scandals, and parliament gridlocked over attempts to further open up the economy.

Other economists have also been taking a knife to their growth projections with Goldman Sachs economist Tushar Poddar expecting 5.7 percent and others seeing under five percent expansion.

The main opposition Bharatiya Janata Party (BJP) said Singh's rosy outlook showed he was in denial mode over the country's economic situation.

Singh's assertion that the economy is strong "clearly shows that the prime minister is living in denial about the real state of the Indian economy", said BJP upper parliamentary house leader Arun Jaitley.

"The patient does not want to be treated. He is convinced he is not unwell," Jaitley said, urging Singh to treat recent economic indicators as a "wake-up" call and take effective measures.

On Thursday, data showed industrial output shrank by a surprise 1.8 percent in June, undermined by high interest rates to fight inflation and Europe's debt crisis which has hit exports.

Separately, the government has appointed the outspoken former chief economist to the International Monetary Fund as the top economic advisor to India's finance ministry, according to press reports.

Raghuram Rajan, acclaimed for predicting the 2008 global financial crisis, currently teaches at the University of Chicago's Booth School of Business, and in the past has said India must do more to liberalise its economy.