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Taxes may be cut to achieve 7 to 8 per cent growth: Ahluwalia

Further reduction in import tariff and liberalisation of import as well as export trade would be encouraged to sustain growth of economy at the estimated level of 7 to 8 per cent in future, said Union Finance Secretary Montek Singh Ahluwalia.

The real challenge before India is to arrive at a consensus among the people to bring changes in policies related to high tariff barriers, industrial restructuring and global integration of the Indian economy, he said.

Addressing the Lalit Doshi memorial lecture in Bombay yesterday, Ahluwalia said that it was a global challenge for India to open up its economy in order to increase its trade share in world trade which remained either subdued or stagnated at half a percentage point.

''Our 40-year-long policies of self-sufficiency and import-substitution did not allow the country to integrate its economy with international trade and our external trade suffered miserably. We should not make that mistake again,'' he emphasised.

Ahluwalia said that there was a greater need to allow foreign investments along with world technology into the country in order to make our products value-added and competitive.

''In spite of our economic reforms since 1991, India continued to be a highly protective market for world trade,'' he observed. ''We cannot make our exports competitive in an environment where the industry remained protected with high import tariff barriers.''

Ahluwalia, who has played a key role in formulating India's economic reforms for the past eight years, said that the country must go in for opening up of the real sector economy such as trade, industry and tariff rates in order to develop its infrastructure, increase export trade and become a world power in the 21st century.

The recent East Asian crisis has taught us a lesson with regards to policy measures such as putting restrictions on foreign currency borrowings that is beneficial in volatile world financial market. ''I hope our critics have realised the merits of our policy by now,'' he said.

The secretary also emphasised the need for globalisation of Indian companies through joint ventures and tie-ups so that it facilitates the inflow of technology and foreign investment into the country.

Thirty per cent of world trade stems from intra-firm trade across the globe and if such trade can be extended to India through internationalisation of our firms, India's export growth can be enhanced.

In this context, he hinted that the government would go slow with regards to capital account convertibility and financial market liberalisation in light of the experience gained from Asian crisis.

UNI