Even while asserting that the ongoing battering of the rupee in the currency markets was being overdone, Finance Minister P. Chidambaram, on Thursday, candidly admitted that the Indian economy was indeed challenged as a consequence of global and domestic factors and the first quarter growth this fiscal would likely remain flat.
However, the silver lining is that, with the various measures in the pipeline and a mix of economic indicators available, a likely pick-up in GDP (gross domestic product) growth can be expected in the remaining three quarters.
At a press conference here to ward off pessimism over the Indian currency breaching the psychological barrier of 65 to the dollar intra-day, Mr. Chidambaram said: “Thanks to the global slowdown as well as some domestic factors, the Indian economy is challenged. Growth slowed down to 5 per cent in 2012-13, and we expect that the growth trend will remain flattish in the first quarter of the current fiscal…We expect that growth will pick up in Q2 to Q4 [second to fourth quarter of 2013-14]”.
Backing his optimism on this count to available trend indicators, Mr. Chidambaram pointed to the marked increase in sown area by about 9.1 per cent, the outcome of which is expected to be a bumper harvest. Besides, the acceleration in the pace of Plan expenditure and the impact of the projects cleared by the CCI (Cabinet Committee on Investment) in the last few months are also expected to lend support in this regard.
During the last 12 months, the government, the Finance Minister said, took a number of measures to contain inflation and revive investment and growth.
“Some results are visible, yet there are many challenges that have to be overcome,” he said.
As for the other positive indicators, such as capital flows by way of FDI (foreign direct investment) and the country’s debt situation, Mr. Chidambaram pointed out that on August 12, he had listed a number of measures that would be taken to enhance the capital inflows by about $11 billion. “Work is in progress on these measures, and we are confident that the results will be visible in the near future,” he said.
In particular, FDI inflows in the first quarter this fiscal, for instance, were $9.14 billion, an increase of 70 per cent over the same quarter last year. Also, exports have risen by 11.7 per cent in July 2013 over July 2012 and the trade deficit in June and July 2013 narrowed to $12.3 billion each month. Net services exports have increased every month since April and were at $6.1 billion in June this year as compared to $4.5 billion in the same month of 2012. “As a result, CAD is narrower. We are exploring structural measures to further reduce the CAD to sustainable levels and, in the meantime, to improve capital inflows,” he said.
Mr. Chidambaram maintained that the country’s debt indicators were also within prudent limits and India does not have excessive public debt (Central and State governments taken together).
“The overall public debt to GDP ratio has declined from 73.2 per cent in 2006-07 to 66 per cent in 2012-13. The economy’s external debt is only 21.2 per cent of GDP. India’s reserves are $277 billion,” he said.
The Finance Minister conceded that the country’s banking sector had seen a rise in non-performing assets.