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Sinha hopeful economy will fare better

Finance Minister Yashwant Sinha said on Tuesday that agricultural performance would be key to the country's overall economic growth this year.

"I hope agriculture will be able to do much better this year than it has done in the past two years. If this happens industrial production will pick up because demand will pick up," Sinha told CNN's Biz Asia in an interview in Hong Kong.

Sinha is on a swing through Hong Kong and Singapore to woo investors.

India's industrial output growth slumped sharply and GDP growth was estimated to have slowed to six per cent in 2000-01 after expanding by 6.4 per cent in 1999-2000. Finance ministry officials are hoping growth will pick up to 6.5 per cent this year. Sinha said the slowdown in agriculture was largely due to a weakening of demand in rural areas where two-thirds of India's one billion population lives.

Agriculture growth grew marginally to 0.9 per cent in 2000/2001(April-March) after posting 0.7 per cent growth in the previous year.

Analysts expect agricultural growth in 2001-2002 to climb to around three per cent if agricultural performance follows past cycles. But much would depend on the monsoon rains, which play a crucial role in the economy as good harvest boosts consumption and demand.

Sinha said his "second generation" of economic reforms was on track and his budget for 2001-02 had given them a boost. India launched its economic reforms programme in 1991 and has taken several steps to liberalise the economy.

The Budget, which contained key measures to usher in India's so-called second generation of economic reforms, seeks to simplify labour laws, streamline the tax structure and press ahead with privatisation of state-run firms.

"I have given a powerful stimulus to the economic reform process through the Budget and I think we are very strongly on the way to second generation economic reforms," he said.

But analysts say this month's setback in the state elections to Prime Minister Atoll Bihari Vajpayee's Bharatiya Janata Party and its allies has put a question mark over the coalition government's ability to press ahead with reforms.

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