Getting down to serious business immediately after taking charge of the Finance portfolio from Pranab Mukherjee, Prime Minister Manmohan Singh on Wednesday sought to rev up the country’s economy to a higher gear by reviving the animal spirit, reversing the pessimistic climate and cheering up investor sentiment.
“Reverse the climate of pessimism...revive the animal spirit in the country's economy…Millions of our countrymen look up to the government to throw open channels for their progress, prosperity and welfare,” Dr. Singh told Finance Ministry officials after reviewing the state of the economy in a series of meeting during the day while stressing that reviving investor sentiment was on top of his priorities.
With the economy passing through a difficult phase by way of rising inflation, widening fiscal and current account deficit and a free fall in the value of the rupee, the Prime Minister held consultations in the morning with Planning Commission Deputy Chairman Montek Singh Ahluwalia and his Economic Advisory Council (PMEAC) Chairman C. Rangarajan to take stock of the situation and followed it up with a meeting with top Finance Ministry officials later during the day.
Ostensibly, the major issues that figured during the discussions were ways and means that can be put in place to control the twin deficits in the wake of concerns expressed by the global rating agencies on these counts even as the latest analysis by Moody’s came as a silver lining.
Economic revival plan
At the meeting with Finance Ministry officials to chalk out a plan for economic revival which, apart from the Secretaries of the five departments, was also attended by Chief Economic Adviser Kaushik Basu and his Prinicipal Secretary Pulok Chatterjee, Dr. Singh encapsulated the numerous problems which were afflicting the economy and the steps that need to be taken to overcome the crisis situation.
“At the current juncture, we are passing through challenging times economically. The growth rate has taken a dip; the industrial performance is not satisfactory; things are not rosy on the investment front; inflation continues to be a problem. On the external front, I am concerned about the way the exchange rate is going. Investor sentiment is down and capital flows are drying up,” Dr. Singh said while pointing out that while the country has to be made resilient to meet the external challenges, there were “many domestic reasons” also which need to be addressed quickly.
“We need to work to get the economy going again and restart the India growth story. In the short run, we need to revive investor sentiment, both domestic and international,” he said. Analysing the reasons for the pessimistic environment, Dr Singh noted that there have been many factors that contributed to this and hinted at the retrospective amendments of tax laws and GAAR (General Anti-Avoidance Rules) without, of course, naming them. “There have been many factors that have contributed to this general negative mood. There are problems on the tax front which need to be addressed. On the Financial Sector side, we need to see how we can improve matters,” he said.
Mutual funds, insurance sector
Besides, Dr. Singh said there were also issues about the mutual funds industry which need to be resolved as also the insurance sector which had seen a slowing down which was not normal in a country with large unmet insurance needs and needs looking into.
Seeking the best efforts of all officials in this regard, the Prime Minister said: “I would like you all to work as a team on all these matters. There are some issues we must address in the short run and some in the long run. I am sure you will be able to work on both fronts.” At the outset, Dr. Singh reminded his North Block mandarins, that he was not new to the Finance Ministry but he was not abreast the nitty-gritties. “I am happy to meet all of you in a new context with me looking after the Finance Portfolio once again. Apart from a brief spell in 2008, I have been away from the details and nitty-gritty of Finance for a long time. Therefore, I depend on all of you to give me sound advice on not just matters relating to the Finance Ministry but all aspects of the government and the economy as a whole,” he said.
Dr. Singh is slated to have meeting with RBI Governor D. Subbarao and Planning Commission members on Thursday as part of his review of affairs concerning the economy.
