Indian Finance Minister P. Chidambaram and Reserve Bank Governor Raghuram Rajan are on an “India story” roadshow in the U.S. this week, and they’re not pulling any punches.
Speaking at the Carnegie Endowment think-tank on Thursday Mr. Chidambaram offered a stout, unapologetic defence of the Indian economy’s prospects and key policy decisions that have guided it thus far.
On the one hand he expressed optimism about the fact that India was on a growth trajectory that would see its Gross Domestic Product double every decade.
He was hopeful, he said, that combined with the U.S. Federal Reserve’s decision to postpone the tapering of its quantitative easing policy, India’s gains from a good monsoon would boost the benefits coming out of economic reforms and produce a growth rate of at least five per cent in 2013-14.
Mr. Chidambaram added, “I know that the World Economic Outlook report does not share my optimism, but I may tell you that we do not share their pessimism. Set against the current global economic background, even a growth rate of 5.0 per cent looks good, but is much lower than the ambitious standards that we set for ourselves in 2004.”
The Finance Minister however qualified his remarks on the upside of the economy admitting that further institutional reform was required, particularly of Indian regulators in some areas, who in some cases “have not done their job as well as I would have liked them to do,” and more had to be done to free these regulators from the “clutches” of “administrative ministries” that exercised control over them.
He also conceded that looking back at the two terms of rule under the UPA government some policy decisions “could have been done differently,” although he argued that the political context mattered for economic policies.
In this context Mr. Chidambaram said that if there had been some sense that the second and third financial stimuli that the government provided after the 2008 global economic crisis were excessive and could have led to “busting” the fiscal deficit limits and raising the spectre of higher inflation, the government may have avoided that course.
Yet during the interaction here he pushed back strongly on some suggestions that India needed to do more for foreign investors, in particular explaining the Indian government’s concern with avoiding international arbitration that could “highjack” national systems of jurisprudence.
He also said foreign investors had to adopt a “Take it as it is,” approach to certain policy decisions such as the ones in the multi-brand retail sector. Instead, he said, some foreign investors were “always asking for more like Oliver Twist.”