More reforms and some 'bitter medicine' on the anvil
India would unleash more reforms in the next few weeks that would bolster the "green shoots" of recovery and instil confidence in Asia's third largest economy, Finance Minister P. Chidambaram said Friday.
The finance minister also spoke about what he called some "bitter medicine" necessary to get back to high growth path.
A day after the cabinet headed by Prime Minister Manmohan Singh took an array of decisions aimed at spurring growth, Chidambaram said: "I am confident that the steps we have taken, and some more steps that we will take in the next few weeks, will help turn the Indian economy around."
He was addressing the Delhi Economics Conclave on "Reviving Growth" organised by the Department of Economic Affairs, the National Institute of Public Finance and Policy (NIPFP) and the Confederation of Indian Industry in the capital.
Later in the day, while winding up a discussion on the first batch of supplementary demands for grants in the Lok Sabha, he said some tough measures would be taken in the coming days to get back to high growth path.
"Some bitter medicine has to be taken this year... There is no other way... This bitter medicine is good medicine. It will restore the health of the economy and next year we can look forward to much higher growth," he said.
After growing at over nine per cent, India's growth fell to nine-year low of 6.5 per cent in 2011-12 and during the current year, as per the projection of teh Reserve Bank of India, it is estimated to be 5.8 per cent.
Chidambaram told the conclave that India weathered the 2008 world financial crisis very well. But the challenge facing the economy now was different from the one seen in 2008.
While in 2008-09, imports had reduced owing to a fall in international crude oil prices, the situation now was different as, while exports were declining, imports continued to remain high mainly on account of crude and gold.
And with rapid globalisation, the external sector of the economy was becoming more vulnerable, Chidambaram said and cautioned that global developments may continue to have a huge impact on the Indian economy.
"The present challenge calls for bold and innovative measures," he said.
Speaking in the same vein, Raghuram Rajan, chief economic adviser, said India was reaching the limits of stimulus and has been forced to contemplate ways to achieve sustainable growth.
Chidambaram said the "government has been making every effort to turn the economy around and encourage investments" and hoped the various steps it had taken would show results.
"It is too early to say whether the measures have begun to bear fruit, although it is our expectation that they will do so," Chidambaram said.
Chidambaram also said the government was addressing tax issues that had caused concerns among investors.
Last December, it seemed the cause for reform and growth in the country hit a low when the government dropped plans to allow foreign investors into retail trade. To its and the Prime Minister's credit, it recovered and last week secured a parliamentary mandate for the retail move.
Emboldened by the vote, the government Thursday decided to set up of Cabinet Committee on Investment to fast-track large project entailing investment of over Rs.1,000 crore, cleared the Land Acquisition Bill and new urea investment policy, besides the opening up multi-brand retail trade to foreign equity.
Chidambaram said countries such as China, India, Japan, South Korea, Indonesia and Russia that are part of the G-20 to come together to iraise the resource base of the Asian Development Bank so that it could play a greater role in infrastructure financing.
The cabinet also decided to slash by 30 percent the base price for telecoms spectrum in four metro circles including Delhi and Mumbai that went unsold in an auction last month.
Arvind Mayaram, secretary in the finance ministry, said the government wanted to maximise revenue and cut the fiscal deficit.
The industry meanwhile welcomed the cabinet decisions, especially the setting up of Cabinet Committee on Investments to ensure faster clearances for large projects.
"This will send a strong signal to the investors that Government is willing to assist the industry through reforms and by further improving the business environment. At a time when our economy and manufacturing sector have slowed down, this single decision will act as major stimulus for the economy," said FICCI president R.V. Kanoria.
According to Centre for Monitoring Indian Economy, projects worth Rs.1.8 lakh crore got shelved during April-August 2012 period primarily because of problems related to land acquisition, environmental clearances and lack of fuel and mineral linkages.