Prime Minister Manmohan Singh Saturday said there was no need for pessimism over the fundamentally strong Indian economy, with the current slowdown just a short-term phenomenon due largely to the ongoing turmoil in the Western world.

"The current slowdown is a matter of concern. But it should be seen as a short-term phenomenon, reflecting highly unsettled conditions in the global economy. Growth rates are being revised downwards in all countries," the prime minister said.

"We must guard against the mood of negativism that seems to have gripped the country. Recently a distinguished business leader said in India the business is better than the mood," the prime minister told the 56th meeting of the National Development Council.

In this light, he said, nine percent growth for the next five years was certainly feasibly, though difficult, if some concerted action was made at all levels. "I have absolutely no doubt that our country's longer term prospects are very good."

SERIOUS CHALLENGES FOR ECONOMY

The economy has been facing a number of challenges this fiscal, notably the slowing of the growth in industrial output and high inflation.

Factory production has been sluggish in the past quarter with data for August showing output at 4.1 percent, while in July it had slumped to 3.8 percent – the lowest in almost two years.

On the other hand, inflation, based on wholesale prices, has been hovering close to double-digits for 10 months now. For September, annual inflation was registered at 9.72 percent. Latest data showed food inflation crossing double digits.

‘SITUATION NOT SO BAD’

The prime minister, however, told the council, which is the highest decisionmaking body on matters pertaining to central and state finances, which also approve the Five Year Plans, that the situation was not as bad as it seemed.

"Investment is, after all, a reflection of the animal spirits of enterprise," the prime minister said, drawing from John Maynard Keynes' book, ‘The General Theory of Employment, Interest and Money’ that describes it as an emotion that influences human behaviour into spontaneous action.

The council, chaired by the Prime Minister, was attended by Planning Commission Deputy Chairman Montek Singh Ahluwalia, Finance Minister Pranab Mukherjee, some key central ministers and chief ministers. They discussed the approach to the Twelfth Five Year Plan (2012-13 to 2016-17).

The prime minister, an economist of repute himself, and a former central bank governor and finance minister, had absolutely no doubt that India's longer term prospects were sound.

"Twenty years ago, in my first budget speech as finance minister, borrowing a phrase from Victor Hugo, I had said: 'No power on earth can stop an idea whose time has come'. I went on to say 'the emergence of India as a major economic power in the world happens to be one such idea'."

Accordingly, he said, this line of thinking has spread across the political spectrum.

"I am happy to say that in the past two decades, different political parties, ruling in different times, in different states, and also in the centre, have pushed in the same general direction to ensure that my prediction is now a widely accepted reality."