By IANS,
New Delhi : Prime Minister Manmohan Singh Friday assured captains of industry that the government will not leave any stone unturned to improve the economy and expressed hope that the Current Account Deficit (CAD) will come down to 2.5 percent in the coming years.
Admitting that the country is going through a difficult period, he said: “I know that business is deeply concerned about the slowdown in our economy. It is looking to the government to bring the economy back to a higher growth path. This, I believe, is a legitimate expectation and is also upper-most in our mind.
“When things are going well, government should interfere as little as possible. When things are going bad, as they seem to be at present, it is the responsibility of the government to become more pro-active,” he said at the 92nd annual general meeting of Assocham here.
The prime minister observed that the most immediate cause of worry was the recent volatility in foreign exchange markets, which was caused due to global markets reacting to the likelihood of a withdrawal of Quantitative Easing-III by the US Federal Reserve Bank.
“Large volumes of funds were withdrawn from emerging markets and there was a depreciation in many emerging market countries including Turkey, Brazil and South Africa. We too experienced a significant depreciation in the exchange value of the rupee. In our case, it was perhaps exacerbated by the fact that our current account deficit in the balance of payment had increased to 4.7 percent of GDP in 2012-13.
“Ideally we should bring the current account deficit down to 2.5 percent of our GDP. It is clearly not possible to do this in one year, but I expect that the current account deficit in 2013-14 will be much lower than the 4.7 percent level recorded last year.
“It will decline further next year. We will use all policy instruments available — fiscal, monetary and supply side interventions to ensure that the Current Account Deficit declines further over time.”
He said the government is committed to bringing the current account deficit under control by addressing both the demand side and the supply side of the problem. On the demand side, he said, “we need to reduce the demand for gold and the demand for petroleum products – the two biggest components of our trade deficit”.
He said gold imports declined sharply in June while on petroleum products, the government has last year begun a process of correcting the prices.
“The gradual correction that was taking place in diesel prices has reduced the gap in under-recoveries from almost Rs.13 per litre to less than Rs.2 per litre.”
The government has targeted fiscal deficit of 4.8 percent of GDP during 2013-14 and announced continuing reductions of about half a percent each year subsequently, up to 2016-17.
He, however, said the country has targeted 6.5 percent growth at the time of the budget this fiscal (2013-14).
“But it looks as if it will be lower than that.”
He added: “What is important is that the economy should turn around from 5 percent achieved last year. There is a very good chance that we can achieve that with good agricultural performance and the effect of the various actions we are taking on infrastructure.”
Prime Minister Manmohan Singh highlighted the performance of the United Progressive Alliance (UPA) government while attending the 92nd annual general meeting of Assocham here Friday.
. The average growth rate in the 8 years of the UPA from 2004-05 to 2012-13 was 8.2 percent per annum. This is much better than the 5.7 percent reached in the previous 8 years.
. Agriculture did much better in the Eleventh Plan than in the Tenth Plan. This is reflected in real per capita rural consumption rising at 2.9 percent per year between 2004-05 and 2011-12 compared with only one percent between 1993-94 and 2004-05.
. Rural real wages have also risen much faster (6.8 percent per year in the 11th Plan as compared to an average of 1.1 percent per year in the ten years preceding it).
. The percentage of population below the poverty line declined at 0.75 percentage points per year before our government came to office in 2004-05. It has fallen more than 2 percentage points per year between 2004-05 and 2011-12.
Prime Minister Manmohan Singh Friday said infrastructure is absolutely critical for the medium-term growth prospects and added “we are monitoring progress in this area on a quarterly basis”.
Various initiatives of the government:
. The Government has plans for setting up two major ports in Andhra Pradesh and in West Bengal. New airports are envisaged to come up in Navi Mumbai, Juhu, Goa, Pune and Kannur. At 50 other locations, new small airports are being built.
. Major railway projects, including an elevated rail corridor for Mumbai, are being processed. The feasibility of a bullet train from Mumbai to Ahmedabad is being studied. Industrial Corridors from Delhi to Mumbai, Amritsar to Kolkata and Chennai to Bangalore are being considered. All these initiatives are being monitored at the highest level with a sense of urgency. There are several other reforms that have been undertaken over the last one year. The banking laws have been amended to raise the cap on voting.
. Subsidy reform and rationalisation has started in full force. Direct Benefit Transfer Scheme is being rolled out across the country to reduce both wastage and corruption in delivery of public service. Foreign Direct Investment has been liberalised in single brand retail, multi-brand retail, civil aviation and power exchanges. More FDI reforms are on the anvil as has been reported. A new bank licensing policy has been announced and new licences are soon to be awarded. GAAR, which has been a subject matter of considerable concern to industry, has been postponed by 2 years and there is greater clarity on the rules.
. Taxation issues of the IT sector and of development centres have been resolved based on the Rangachary Committee report. Public sector investment has been fast-tracked and I have estimated that over Rs.120,000 crore has been invested by major Public Sector Units last year. Infrastructure Debt Funds have been rolled out. Sugar has been fully decontrolled. Railways have corrected their fares for the first time in a decade.
. Construction has begun on the Dedicated Freight Corridor. The investment policy for urea has been approved. Gas pricing has been corrected to reflect market realities better. Procedural improvements have been made in the road sector to improve the economic viability of projects.