Acknowledging that the slowdown in the economy during the last one year was a cause for concern, Prime Minister Manmohan Singh on Friday hinted at more reforms in foreign direct investment (FDI) in some more sectors, reversal of the recent tight monetary policy by RBI and a major boost to a number of infrastructure initiatives to give a big boost to growth.
Conceding that the economic growth during 2013-14 will be lower than the targeted growth of 6.5 per cent, he said a turnaround from the 5 per cent achieved in 2012-13 would be important. ``The most immediate cause of worry is the recent volatility in foreign exchange market. The Reserve Bank of India (RBI) has done its bit to mobilise market expectations. More recently, it took additional steps to raise short-term interest rates. These steps are not meant to signal an increase in the long term interest rates. They are designed to contain speculative pressure on currency. Once these short term pressures have been contained, as I expect RBI to even consider reversing these pressures,’’ Dr. Singh said while speaking at the annual general meeting of the Assocham here.
Dr. Singh said the government would use all policy instruments available -- fiscal, monetary and supply side interventions -- to ensure that the current account deficit (CAD) declines further over a period of time. ``More FDI reforms in some other sectors are also on the anvil. A new banking license policy has been announced and new licenses would be issued very soon,’’ he remarked. In big-ticket reforms push, the government on July 16 decided to hike FDI in the defence, telecom, insurance and some other sectors to boost inflow of foreign funds and investments.
The Prime Minister said the basic fundamentals of economy were sound and healthy and several measures had been taken by the government to correct imbalances on the macro front. Dr. Singh said many projects that have been held up for lack of regulatory approvals were being expedited and big-ticket projects are being identified to clear the hurdles in order to give a big push to infrastructure initiative aimed at reviving the growth momentum. ``Infrastructure was absolutely critical for medium term growth prospects and progress on them was being monitored on a quarterly basis,’’ he added.
Listing out a number of infrastructure initiatives, he said two major ports in Andhra Pradesh and West Bengal, new airports in Navi Mumbai, Juhu, Goa, Pune and Kannur have been cleared. Talking about GAAR, Dr. Singh said it has been postponed by two years and there is greater clarity on the rules. ``Gas pricing has been corrected to reflect market realities better and procedural improvements have been made in the road sector to improve the economic viability of projects. We will persevere with these initiatives and I hope that their impact will be felt in the second half of this year,’’ he added.
Putting thrust on pushing exports, he said this will be helped by the depreciation in the rupee will help. ``There is a time lag before this benefit will be felt in terms of export volumes, but orders being booked from now on would certainly benefit. The government is also trying to remove the constraints in the export of iron and other ores which saw a considerable decline during the last one year,’’ he remarked.
On the demand side, he said there was a need to reduce the demand for gold and petroleum products -- the two biggest drains on the foreign exchange front. ``The government has taken measures to control the demand for gold and they have had some effect. Gold imports declined sharply in June, and I hope they will stay at normal levels from now on,’’ he said.