India's GDP can grow at 9.5%: Montek

India, whose economy has been coasting along at 8 per cent for the last three years, can achieve 9.5 per cent GDP growth even in the absence of hard labour reforms or foreign direct investment in the retail sector, Planning Commission deputy chairman Montek Singh Ahluwalia has said.

"I have absolutely no doubt that you can achieve 9.5 per cent if you do what is necessary. The Indian economy has reached there. The question is will we be able to take the supportive measures," he said in an interview to Karan Thapar on Devil's Advocate programme to be telecast on CNN-IBN news channel on Saturday.

The Planning Commission has targeted a 9.5 per cent growth in the last year of the approaching 11th Five-Year Plan (2007-2012) to realise an average 8.5 per cent growth during the p.a. period.

Ahluwalia, however, said that this growth was "not going to happen automatically. We are on a very good wicket. The average growth rate is over 7 per cent. But to get from that to 8.5 per cent is not just a matter of coasting along. We have to do far more."

While pointing out that economic reforms were absolutely necessary to sustain the growth, he said as regards labour reforms," the government has made it very plain that this is not an issue on which it is going to do top-down decision making.

"It needs to discuss with (the) trade unions. It has also clearly ruled out hire and fire. The main point we are making is that short of hire and fire there are lot of things that can be done."

While many economists believe that 8-9 per cent economic growth would be impossible without hard labour reforms, Ahluwalia said, "Economic policy is to some extent the art of what is politically feasible."

On the issue of permitting FDI in retail trade, which too is considered the key to higher GDP growth, the Planning Commission Deputy Chairman said, "I do believe (that) the introduction of modern retailing is very crucial and over due. (However) I want to emphasise one thing, FDI in retail is not in my view critical in the next few years to achieve 8.5 per cent growth.

"Many other things are more critical... (but) there's no doubt people will view it as a symbol." He, however, said absence of four per cent growth in the agriculture sector might pare economic gains by up to 1.5 per cent.

"My guess is that the direct contribution of failing to do 4 per cent would be something over half a percentage point in terms of (overall) loss of growth. The indirect contribution, because of lack of dynamism and other things could be about one percentage point. So it is quite important," he added.