By  on October 12, 2007

GENEVA — India's ambitious target to reach an economic growth rate of 10 percent per year by 2011 "is achievable" if economic and structural reforms intensify, according to a new report.

Removal of the ban on foreign direct investment in retail shops should be among the reform measures, the study said. This would help "improve the productivity and supply chain management" and lower prices for consumers, according to the first economic survey of India by the Paris-based Organization for Economic Cooperation and Development.

"The policy framework for [foreign direct investment] in India is still restrictive" compared with developed nations, the report said.

Many of the investment restrictions, said analysts, apply to fast-growing areas that would stand to gain from increased foreign investment.

"Relaxing [foreign direct investment] restrictions in banking, insurance and retail distribution would seem likely to improve real incomes, given the poor productivity," they said.

Although foreign ownership of as much as 100 percent is allowed in a range of sectors such as manufacturing, wholesale cash-and-carry distribution and Internet service providers, it is prohibited for multibrand retailing and limited to 51 percent for retail distribution of a single brand.

The Paris organization estimated India's annual economic growth at 8.5 percent, but said further liberalization of the economy, including lowering state intervention and control, and boosting the role of the private sector, "will deliver additional growth dividends."

Angel Gurria, secretary-general of the group, said "undertaking a series of economic reforms would allow India to reach a sustainable growth rate of 10 percent."

Areas that he identified for possible action included improving the business environment, infrastructure, public finances and labor market reform. Red tape still holds back business, the report said.

In 2006, India's merchandise exports increased 21 percent to $120 billion and its imports expanded by 25 percent to $174 billion, according to World Trade Organization data.

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