Prime minister Manmohan Singh today said the economy is expected to grow by 8.5% this fiscal and the country was capable of achieving 10% expansion in the medium term.
The forecast comes on top of an estimated 7.2% growth in 2009-10, the year that saw India weather the effects of the global economic crisis.
"We need a rapidly growing economy to generate productive employment and also resources to finance our ambitious social and economic agenda," Singh said at a national press conference here to mark completion of one year of UPA-II in office.
Growth had slipped to 6.5% in 2008-09 at the height of the economic crisis triggered by collapse of financial institutions in the West.
"Our medium term target is to achieve a growth rate of 10% per annum. I am convinced that given our savings and investment rates, this is an achievable target," Singh, regarded as the architect of India's financial reforms, said.
India's savings and investment rate is nearly 35% of GDP, next only to China's 49%.
"However, its (high growth) achievement will require determined efforts to increase investment in social and economic infrastructure, enhance productivity in agriculture and give a fresh impetus to the manufacturing sector," the prime minister said.
"Our annual rate had averaged 9% for four years before the crisis. It reduced to 6.5% in 2008-09, but recovered to 7.2% in 2009-10. We expect 8.5% growth in this financial year," he said, noting that the first concern in the wake of the financial crisis was to protect the economy from the global slowdown.
This had prompted the government to deviate from fiscal prudence by way of stimulus measures (involving high borrowings to step up public spending and foregoing of revenue to boost manufacturing), leading to fiscal deficit shooting to over 6% of GDP - a broad measure of a country's economic wealth.
In the Budget for 2010-11, the government partially withdrew the stimulus, saying economic recovery was strong.
"The record of our first year is a record of reasonable achievement," Singh said.