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Posted on Dec 15, 02:50PM | IBNS
Prime Minister Manmohan Singh on Saturday said his government will do its best to turn around the economic situation and take back the country to the 8 to 9 percent growth level and contain high inflation.
"Steps we have taken recently are only the beginning of a process to revive our economy and take it back to its trend growth rate of 8-9pc ," said the Prime Minister at the Annual General Meeting of industry body FICCI.
"Even as we make our growth process more inclusive, we cannot lower our guard in pursuing policies that restore growth momentum to the economy. This task has become more onerous because the global environment for growth has become less supportive," he said.
"Between 2003 and 2008, the years of 9.0 per cent growth, the Indian economy benefitted from a more benign global environment. Since 2009 this environment has become more challenging. As a result and also because of some domestic constraints, economic growth rates have come down to a range of 5.5 to 6.0pc . Our export growth has declined and the fiscal and current account deficits have gone up," said the PM.
He said this has had a ripple effect, dampening economic growth as well as investor sentiment.
"We are today seized of the need to step up investment and savings rates commensurate with the requirements of 8-9 percent GDP growth in the 12th Five Year Plan. It is with this objective in mind that our government has taken a series of measures aimed at reviving investor sentiment, controlling the fiscal and current account deficits and improving infrastructure," he said.
The PM said: "The inflation rates in the last two years have also increased to unacceptably high levels and need to be brought down to no more than 5 to 6 percent per annum."
The PM is also worried about fiscal deficit.
"Last year the central government's fiscal deficit touched a high of 5.9pc of our GDP. This was clearly unsustainable. The Finance Minister has come out with a roadmap to reduce it to 5.3pc this year and to 3.0pc by 2016-17.," he informed
"Our government is serious about moving in this direction. Our action in correcting distortions in energy pricing, reducing diesel and LPG subsidies, was aimed to achieve this objective," he said.
He said as challenging as the fiscal deficit has been the rising current account deficit in the balance of payments.
Singh said he was pained to see the level of social and regional inequalities that continue to exist in India.
"Disparities in income and wealth cannot be eliminated overnight or in the short run. But, disparities of the kind we have in India, even in terms of access to basic facilities such as health, education, safe drinking water, electricity, rural infrastructure and even banking, is something that the nation can ill afford," the PM said.
He said the private sector should also play a more active role in the areas of R and D, education and skill development, health and rural development.
The PM said the global economy is still passing through turbulent times.
"The economic situation in Europe has been a source of concern for quite some time. The US economy is not completely out of the woods. China too is witnessing a slowdown. There is considerable uncertainty about when the global economic situation will improve. However, as you have seen in these past few weeks, our Government has acted to reverse the cycle of negative expectations, and stimulate investment.
"I wish to utilize this occasion to outline three broad themes - first, to underline the importance of accelerating economic growth and making the growth process socially and regionally more inclusive; Second, to draw your attention to the measures that we have already taken towards this end; and finally, outline steps we still need to and we intend to take," said the PM.
"We have been able to accelerate the pace of economic growth over the last decade, with an average growth rate of over 8pc . Even now, we are the second fastest growing large economy in the world," he said.
"Our per capita levels have reached a point where India may soon be required to graduate out of IDA, the low cost lending facility of the World Bank. When I came into government forty years ago, IDA was an important source of funding for us. Today we are able to extend such low cost funding to other countries, particularly countries in the neighborhood and countries of Africa," he said.
He also defended his recent tough economic decisions.
"I am afraid that those who oppose these moves are either ignorant of global realities or are constrained by out-dated ideologies. Some of the decisions we have taken were politically difficult and the naysayers and the cynics have tried to halt us in our tracks," he said.
"Given the global environment, investors have become risk averse and global trade has slowed down. To address this challenge we have liberalized our policy on foreign direct investment. Our decision on Foreign Direct Investment in Multi-brand retail, civil aviation, power-trading exchanges and broadcasting must also be viewed in this larger context," he said.
"Bills on liberalising FDI limits in banking and insurance are currently before parliament. Each of these decisions is based on sound economic logic. But they were also based on larger concerns about national security and the need to insulate India from the persistent global economic slowdown."
"...when I hear the debate on Foreign Direct Investment in Retail, what I hear are arguments against large scale organized retail, and not against Foreign Direct Investment in retail," he said.
He said: "We are today seized of the need to step up the investment and savings rates. Even as we make our growth process inclusive, we cannot lower our guard in pursuing policies that restore growth momentum to the economy," he said.
He said the Direct Cash Transfer was launched to transfer government benefits directly to the bank accounts of individual. beneficiaries.
The PM said despite the challenges "we must recognize that poverty has declined at a pace never seen in the past 200 years."
"A more prosperous and better connected populace is a source of larger demand and markets for goods and services," he said.
The PM said broadening the social base of development not only improves well-being but also widens the home market for business.