Finance Minister P. Chidambaram on Thursday made a strong case for encouraging foreign and domestic investment to boost growth and said PSUs alone are expected to pump in Rs 1.33 lakh crore in the current financial year.
“Investment must revive in this country...the economy has stabilised. The investment cycle has to start again. Both domestic investment and foreign investment must be encouraged. That will lead us to high growth,” he said while addressing the media at the AICC headquarters.
The minister said the capital expenditure plan of 23 public sector undertakings, including Oil & Natural Gas Corp, Oil India Ltd, Indian Oil Corp and NTPC, will go up to Rs 1.33 lakh crore from Rs 1.25 lakh crore in 2013-14.
He said the capital requirement of banks in 2014-15 is estimated at Rs 45,528 crore, as against Rs 14,000 crore in the previous financial year. In the interim budget, the government proposed to infuse Rs 11,200 crore in public sector banks.
Mr. Chidambaram said foreign direct investment inflows in 2013-14 would exceed USD 27 billion. The inflows were USD 26.95 billion in 2012-13 and as per the latest estimate, it was USD 26.9 billion during April-February.
The Finance Minister said inflation is being driven mainly by food items and the open market sale of food grains is a way of cooling prices.
While keeping inflation under check, Mr. Chidambaram said the central bank should keep in mind the need to spur growth.
He expressed confidence that the Reserve Bank of India would keep this in mind while deciding on monetary policy initiatives.
Asked about reports that the RBI Governor may be changed if the BJP-led alliance comes to power, Mr. Chidambaram said Raghuram Rajan has outstanding credentials and the new government must respect the appointment.
India’s economic growth rate, which slipped to a decade low of 4.5 per cent in 2012-13, is estimated to inch up to 4.9 per cent in 2013-14. It is projected to increase to 5.5 per cent in the current financial year.
To a query regarding the international arbitration notice served by British telecom giant Vodafone over the Rs 20,000 crore tax dispute, Mr. Chidambaram said the government will contest the notice.
“I have already proposed to the cabinet that since they have gone back and issued arbitration notice, the original offer of non-binding conciliation stands withdrawn. That offer is no longer valid,” he said, adding the government will defend its case during the arbitration.
The Cabinet had in June 2013 approved a Finance Ministry proposal to go in for conciliation with Vodafone to resolve the capital gains tax dispute related to its 2007 acquisition of assets in India from Hong Kong-based Hutchison Whampoa.
Replying to a question on the exchange rate, Mr. Chidambaram said, “We think that rupee at about 60 to a dollar, given the REER (real effective exchange rate), is more or less an accurate reflection of the true value of the currency.”