Finance Minister P.Chidambaram on Friday rejected suggestions that India is imposing restrictions on investments and said the country’s economy is opening up in a gradual manner.
“I think the right way to look at it is we are not restricting. We are opening up in a gradual manner. Where were we in 1991. What are we today, in 2013? In the space of 22 years we have opened practically 90 per cent of India’s economy,” Mr. Chidambaram told the popular Charlie Rose Show in an interview.
“There are still some areas which are closed or which are restricted. But they will open up. But the areas that are being opened up are so large, all this manufacturing. Steel, power, roads, airports, seaports, all this is open. Therefore, there’s a huge opportunity for investors,” he emphasized.
Observing that India has opened up 90 per cent of its economy in the 22 years of liberalisation since 1991, Mr. Chidambaram said that the country could become a “giant economy” if it grows at eight per cent continuously the for seven-eight years.
“See, our savings rate in the worst year was 30 per cent. In the best year, was 36 per cent of GDP. Pick any number between 30 and 36 for incremental capital output ratio, what economists call ICOR, is about 4. Our potential growth rate is about 8 per cent,” Mr. Chidambaram said.
“If we continue to grow at eight per cent for, say, seven years or eight years or ten years, like China did at 10 per cent for over ten years, it compounds, and we become a giant economy,” the Finance Minister said.
Mr. Chidambaram is currently in Washington to attend the annual Spring meeting of the International Monetary Fund (IMF) and the World Bank.
The Finance Minister held a series of bilateral and group meetings related to the IMF, World Bank and G-24.
Noting that India does not encourage joint ventures with the government, Mr.Chidambaram said in most areas, New Delhi allows 100 per cent foreign direct investment.
“And he can choose his partner, a private partner if he wishes to choose a private partner. In fact, we don’t encourage him to have a joint venture with the government,” he insisted in response to a question.
“This argument has been made about India, I think it might have been Jim O’Neill of Goldman Sachs, saying that they don’t govern enough, that politics has to get better. Does that ring true to you at all? Do you know what he might be saying?” Charlie Rose asked.
“It is true of India. But let me add, it is true of every country. We can have better governance. I don’t think you should generalise. There are many states in India where there is good governance. The central government generally provides good governance. But there are weaknesses,” Mr. Chidambaram said.
“We need to identify those weaknesses and rectify them. But how can anyone say that we have reached the Acme of governance? Obviously governance can improve. We need to learn, for example, from the Japanese or the Chinese how to execute a project on time without a cost overrun,” he said.
The Finance Minister said that he does not subscribe to the theory that America will decline as this is a country built on talented immigrants, and people with fire in the belly.
“I have not subscribed ever to the theory that America will decline. America’s great strength is its ability to attract talent from all over the world,” Mr. Chidambaram said.
“It’s a country built on talented immigrants, hungry immigrants, people with fire in the belly. That’s its greatest strength. The second great strength of America is its universities. Nowhere in the world do we have such universities,” he said.
The Finance Minister was responding to questions about a group of analysts saying that the US is on decline.
Mr.Chidambaram said there are no clear signs that recovery has begun over all countries.
“For example, global economy actually slowed from 2011 to 2012. And although there are estimates that go to increase by a few per cent, few decimal points in 2013, that’s not very clear to me,” he said.
“Advanced industrial economies have slowed even further. Advanced industrial economies average growth is one-half the average for the world. Now look at BRICs, the emerging large economies,” he said in response to a question.
Keywords: IMF, Cyprus crisis, capital controls, P.Chidambaram, IMF, Indian economy, economic growth rate, Current Account Deficit, gross domestic product, Cyprus economy, Cyprus economic crisis, euro zone risks