By IANS,
New Delhi: Prime Minister Manmohan Singh Saturday defended the policy reforms unveiled by his government, and said those were necessary to revive economic growth, improve the investment climate and boost public finances.
And he hoped the Indian economy battling a slowdown would rebound in the second half of the current fiscal.
“Our immediate priority must be to orchestrate a rebound in the second half of the current year. We should then try to accelerate growth to reach around 9 percent by the end of the Plan period,” Manmohan Singh said, warning that a prolonged “policy logjam” could slow economic growth to 5 percent.
“It will take courage and some risks but it should be our endeavour to ensure that it succeeds. The country deserves no less,” Singh said at the meeting of the full Planning Commission, called to finalise the country’s 12th Five-Year (2012-17) Plan.
In what is viewed as big bang reforms, the government a day earlier opened way for FDI in multi-brand retail, allowed foreign airlines to buy stakes in local carriers, and raised the FDI cap for broadcast carriers.
“To achieve the target of 8.2 percent growth (contained in a new five-year economic plan), we need to revive investment in the economy. The investment environment is therefore critical.”
Singh also stressed the need to restore the fiscal health of the country.
“I believe we can attract financing we need, provided our fiscal deficit is seen to be coming under control and the growth momentum is regained.”
India’s fiscal deficit is projected at 5.1 percent of gross domestic product (GDP) in the current financial year, compared with last year’s 5.75 percent, which many believe could spin out of control and touch 6 percent if the government does not curb its expenditure on subsidies in fuel and fertilisers.
Viewed in that sense, according to the prime minister, Thursday’s increase in diesel prices is “an important step in the right direction” as fuel prices in India are out of line with world prices.
“Our fiscal deficit is too high and is attracting adverse comment from analysts. It must be brought down over the medium term to release domestic resources for productive deployment in the economy.”
He referred to falling exports and the current account deficit of 2.9 per cent of the GDP that the 12th Plan projects.
“This must be financed mainly through Foreign Direct Investment and Foreign Institutional Investment flows, so that reliance on external debt is contained,” he said.
The prime minister called for speeding up the infrastructure projects, which are crucial for removing supply bottlenecks that constrain growth in other sectors.
Saying that the country needs around a trillion dollars of investment in infrastructure, Singh said good infrastructure will boost investor sentiment to raise the overall rate of investment.
Focussing on the agriculture sector, he said agriculture growth needs to be accelerated to 4 percent.
At the end, the prime minister said, “Our objective is not just growth of GDP, but growth that is inclusive and also sustainable.”