Comments
“In business terms, we are at least a year ahead of plan” on the path to economic growth and India is “out of the macroeconomic trough,” said Minister of State for Finance Jayant Sinha.
Interacting with chief executives, industry representatives and diplomats at a power ‘Breakfast with BusinessLine’ here on Saturday, he acknowledged that the pace of recovery has been aided by ‘tailwinds’ of dropping oil and commodity prices. Otherwise, “I would have said it would have taken a year more,” he added.
At the interaction, moderated by Aarati Krishnan, Editorial Consultant, BusinessLine , he said that a series of clearly-thought-out steps over the last one year has already contributed to an economic turnaround. When the NDA came to power in May 2014, Sinha said, “India was a macroeconomic basket case” with the fiscal deficit, current account deficit, investment ratio, and savings rate “in terrible shape.”
But, now, with the fiscal deficit, current account deficit and inflation reined in and financial savings reviving, the focus is on growth. “A robust foundation is in place and we will push hard to ensure a sustained 8-9 per cent growth,” he said. The government is confident that this growth will be “high quality, sustainable,” he said.
Exuding optimism Three factors back his optimism. The Reserve Bank of India is in ‘ease mode’ — interest rates are down 75 basis points. There is hope for more easing of rates, which will drive a “standard cyclical upswing,” Sinha said.
Second, the recent Budget has provided more resources for capital expenditure and public investment, which will catalyse private investment. Capital expenditure by the government and the public sector is up about ₹75,000 crore this fiscal year in terms of gross budgetary support, apart from funds to be raised via infrastructure bonds.
The Indian Railways, which has been starved of investments over the last decade, now has access to ₹1.5 lakh crore debt from LIC for five years.
Similarly, investments are being stepped up in road construction and ports while the efforts made in the energy sector are evident, he stated. Coal production is up in double digits, investment in renewable energy is seeing a boom, he said. Foreign investors are committing a lot of capital to new projects in sectors such as electronics and renewable energy.
The third driver is the structural reforms, the most important being the Goods and Services Tax and the Land Acquisition Bill. “If we can get the GST through Parliament, that will add half to one percentage point to GDP growth,” said Sinha.
Monsoon watch But there are risks ahead, the Minister acknowledged. “The monsoons are India’s real Finance Minister,” he quipped, adding that a shortfall could re-trigger food inflation and drive up the Consumer Price Index. So also the global situation; with worries in China and Greece, the global economy is soft and exports are suffering. Finally, domestic politics is a concern, too. The government is hoping that the monsoon session will be productive with GST and other important Bills getting cleared.
Sinha pointed to the buoyant indirect tax collections in the first three months of this fiscal year as evidence of growth returning and noted that the ‘real benefit’ of lower oil prices was coming in now. Lower commodity prices in general are now supportive of, and leading to, faster GDP growth, he said.
Asked why the impact of the economic revival was not yet visible on the ground, the Minister said that the ongoing fiscal consolidation and the still high interest rates were bound to cause short-term pain to industry. But repairing government finances and getting financial savings back on track were critical to getting back to the growth path.
However, the confidence among investors that “we are a decisive government, with a clear set of economic policies” has already helped investment flows, bolstered capital markets and generated momentum, he said.
The RBI’s tight money policy had been necessary though it hit the consumer and industry. That was required to deal with sticky and entrenched inflation of over 8 per cent for the last seven years. But the net result is that the 3.9 per cent fiscal deficit target is achievable and will still give us fiscal space, said Sinha.
To conclude, he told industry to “keep the faith, go out and create jobs”.
Read also: ‘India has the potential to be an innovation hub’
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.