India's economy is at a ``take-off'' stage and is poised to grow as much as 10 percent a year for the next decade, Lehman Brothers Asia Ltd. said.

The South Asian economy, which has averaged 8.6 percent growth each year since 2003, is increasing consumption and investment spending just as China and South Korea did during the early stages of their economic development, the report said.

``We judge that India could grow even faster'' than it is expanding at present, Lehman Brothers said in the report entitled `India: Everything to Play For.' ``This judgment is contingent on India continuing to actively pursue structural economic reforms.''

Financial reforms, including development of a corporate bond market, pensions and insurance will spur investment and add as much as 1.5 percentage points to growth, Lehman said. Better transport and power networks and allowing companies to hire and fire workers would also spur the economy, the Organisation for Economic Cooperation and Development said last week.

Prime Minister Manmohan Singh's government is aiming to accelerate growth to as much as 10 percent a year by 2012 to create more jobs and cut poverty in the world's second-most populous country. India estimates 22 percent of its 1.1 billion people are poor, based on their consumption of food, clothing and other essential items.

The OECD estimates the absolute number of poor in India fell for the first time between 1999 and 2004 after the government pursued policies started in 1991 to allow more foreign investment and reduce regulation on industry.

`Economic Take-Off'

Economic take-off was a term coined in 1960 by American economist W. W. Rostow, an adviser to President John F. Kennedy and Lyndon B. Johnson. He said that economies evolve in stages and that a ``take-off'' is the period when the old blocks and resistance to steady growth are finally overcome.

India's $906 billion economy, Asia's third largest, grew at about a 6 percent pace in the 1990s and may expand by more than 9 percent in the current fiscal period for the third year in a row, the government estimates. The pace is second only to China among the world's major economies. China's economy has more than doubled to $2.8 trillion in the past five years.

India's pace of expansion has helped per capita income to almost double to $800 since 2000, Lehman estimated, boosting users of mobile-phone services of Vodafone Essar Ltd. and other companies to 148 million in August from 49 million two years ago.

Microwave Ovens

Annual domestic sales of microwave ovens rose 29 percent in the year ended March 31 and sales of high-end ``frost-free'' refrigerators are growing at a faster rate than the traditional ``direct cool'' ones, reflecting growing income and aspiration levels, Lehman said.

Lehman says India must make many more changes to unshackle the country's potential to grow faster. For example, to support India's nascent boom in business investment, the government must develop a corporate bond market, which today accounts for just 3 percent of the gross domestic product.

With half of India's 1.1 billion people below the age of 25, the nation's gross domestic savings ratio could rise to 40 percent by 2025 from 34 percent currently.

To mobilize these savings into investment, India must allow expansion of pension and insurance business. Eighty percent of India's population has no insurance cover, while 88 percent of the workforce doesn't contribute to pension schemes, Lehman estimates.

The pension business is not open to foreign investors and there is a 26 percent limit on overseas investments in local insurance companies.

Communist Opposition

Prime Minister Singh's communist allies are opposed to easing rules for foreign investors and resisting plans to liberalize laws that prevent companies employing more than 100 people from firing workers without government permission.

In infrastructure, India's finance ministry estimates that power shortages alone shave off two percentage points from India's growth.

Efforts to boost power supply by forging a civilian nuclear energy agreement with the U.S. have also been thwarted by the communist allies since August, when they threatened to pull the government down on the issue.

Singh yesterday told U.S. President George W. Bush that the agreement has run into difficulties, indicating he'd abandon the pact to prevent the collapse of his government. Singh's five- year term ends in May 2009.

``Pushing through structural reform will remain a political challenge in the face of headwinds from vested interests and coalition politics,'' Lehman said. ``That said, there should be a new window for reform after the next general election in 2009.''