‘Improved global prospects will boost our economy’

Dismissing concerns over a perceived slowdown in the economy, Finance Minister Arun Jaitley on Thursday said the improved prospects of the global economy will also have a positive impact on India.

“If the world economy moves up, a consequential impact on the Indian economy will follow. This is one of the reasons why the Indian economy is also destined to move up,” he told investors at an interactive session organised by industry chamber FICCI.

His comments come in the wake of the IMF upgrading growth forecasts for the global economy, though it has scaled down India’s GDP growth projection for 2017.

Short-term pain Commenting on the impact of demonetisation and GST rollout — which pulled down GDP growth to a three-year low of 5.7 per cent in the first quarter — Jaitley said: “When you undertake structural reforms of this kind, there can be short-term impact for one-two quarters. But it shouldn’t have a long-term impact.” Referring to the improved industrial output at 4.3 per cent in August, Economic Affairs Secretary Subhash Chandra Garg said that September onwards, the data will show significant economic recovery.

Urging investors to consider investing in India, Jaitley said opportunities in the country are “tremendously wide”, and that the Centre is looking for foreign investments in aviation and defence.

“The aviation sector is expanding and there is huge expansion over the next few decades. US companies are natural investors,” he said, adding that even in the defence sector, the government wants foreign companies to partner with domestic firms for local manufacturing units.

Land, labour reforms He downplayed concerns over pending land and labour reforms and said the State governments own large tracts of land that they can provide for setting up industrial units.

They are also free to amend their respective land acquisition laws.

“The labour problem in India is a little overstated,” Jaitley said, adding that the age of strikes is long over. He noted that recent reforms in aviation and banking did not see any major resistance from labour unions.

Further, a Group of Ministers is finalising Labour Codes, said the Minister. “One Labour Code is in Parliament and another will be taken up by the Union Cabinet soon.”

Jaitley also said the Centre will stick to fiscal prudence and indicated that it will meet the fiscal deficit target of 3.2 per cent of the GDP for 2017-18. “Our priorities include fiscal prudence at a very high level,” he said.

While direct tax collections in the first six months of the fiscal are almost on target, the Centre will get a sense of the trend in GST receipts in another two-three months, he further said.

Jaitley is here to attend the annual meetings of the IMF and World Bank. Earlier in the day he also held bilateral meetings with the US Treasury and Commerce Secretaries.

Commenting on his meeting, he said: “The US administration has a very clear understanding of the kind of reforms and expansion of the economy.” Over the past four days of his stay in the US, he has seen a very positive mood about India, he added.

Demonetisation impact Economic Affairs Secretary Subhash Chandra Garg, meanwhile, said on Thursday that demonetisation has led to “total obliteration of fake currency” in the country. “We have not discovered even one fake currency note in the country since November 8. These gains are not often realised,” he told investors at the FICCI session.

Garg further said that post demonetisation about ₹6 lakh crore worth of ₹500 and ₹1,000 notes are not in the system any more.

The writer is in Washington as part of the IMF Journalism Fellowship 2017 to cover the annual meetings of the IMF and World Bank.

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