Planning Commission Deputy Chairman Montek Singh Ahluwalia on Wednesday pitched for going ahead with the pending financial sector reforms as the liberalisation measure would not unsettle the country’s growth process and the anticipated rise in foreign investment flows would be good for the economy.
Alongside, while expressing concern over the current food price-led inflation which he felt would ease in the coming months with the arrival of rabi crops, Mr. Ahluwalia upped his growth projection for the current fiscal to 6.5 per cent, a tad higher than the Commission’s earlier at 6.3 per cent but in line with the assessment of the Prime Minister’s Economic Advisory Council. “… 6.5 per cent [GDP growth for 2009-10] is my forecast,” he said.
Mr. Ahluwalia was interacting with the media at the Economic Editors’ Conference here at a session on the macro economic scenario and the state of the economy. Although the inflationary pressure on the economy was a worrying factor, he pointed out that prices, especially of food articles, have started declining and would fall further in the next few months. “We are concerned about inflation...with [a] good rabi, food price inflation will come down. In the next few months, you will see decline in inflation,” he said.
As a direct fall-out of the global meltdown followed by an erratic and one of the worst monsoons in decades affecting farm production, Mr. Ahluwalia admitted that the nine per cent growth target fixed for the XI Plan (2007-12) would not be met and the Planning Commission would be scaling it down. On the issue of rising foreign inflows, Mr. Ahluwalia pointed out that while investment [long term] flows would be good for the economy and can be absorbed without stoking inflation but a strict vigil would have to be kept on short-term debts. “I think we can absorb those foreign investment flows,” he said.
Commenting on the ongoing debate over the advisability of taking up the stalled financial sector reforms — in the wake of Prime Minister Manmohan Singh’s emphasis last week on pushing reforms to put put the economy back on the higher growth trajectory of 9-10 per cent — Mr. Ahluwalia said that going ahead with the pending reforms would in no way destabilise the economy. “Therefore, it would be a great mistake to stop financial sector reforms,” he said.
According to government sources, six Bills are to be reintroduced in Parliament, some of which may be in the winter session starting November 19.
These include one on insurance to hike the foreign direct investment (FDI) cap to 49 per cent from 26 per cent at present and another on reducing the government stake in State Bank of India to 51 per cent. Among other major pending reform legislations is the issue of opening up the pension sector to private and foreign entities.