Painting an otherwise gloomy global scenario, Prime Minister Manmohan Singh on Wednesday sought to bring some cheer by way of hoping to do a little better this year than the 6.5 per cent GDP (gross domestic product) growth last fiscal, but provided no comfort in matters of controlling inflation as a bad monsoon would pose some difficulty in this regard.
In his Independence Day address to the nation, Dr. Singh analysed the reasons for the slow growth and what needed to be done to hasten the pace. He asserted that the government would have to take steps to encourage new investments and attract foreign capital. For this confidence would have to be created at the international level that there were no investment barriers.
Detailing the reasons impacting the country’s economic growth, Dr. Singh said: “…these days the global economy is passing through a difficult phase. The pace of economic growth has come down in all countries of the world. Seen together, the European countries are estimated to grow at 0 per cent this year. Our country has also been affected by these adverse external conditions. Also, there have been domestic developments which are hindering our economic growth. Last year our GDP grew by 6.5 per cent. This year we hope to do a little better.”
Dr. Singh pointed out that while nothing much could be done about the conditions prevailing outside the country, the government would have to make every effort to resolve the domestic problems to speed up economic growth and create employment opportunities. However, controlling inflation continued to remain a stumbling block. “While doing this, we must also control inflation. This would pose some difficulty because of a bad monsoon this year. However, we have taken many measures to deal with the situation,” he said.
The Prime Minister indicated that while the price spiral would pose a challenge in view of the drought-like situation in some parts of the country, the government had taken adequate steps to address the problems. For instance, in districts where there had been a deficit of 50 per cent or more in the rainfall, diesel subsidy was being provided to farmers, seed subsidy had been enhanced and funds available under the Central scheme for fodder had been increased.
“Our effort is to ensure that people do not face difficulty due to shortage of seeds, fodder or water in any part of the country. It is good that we have a big stock of foodgrains,” Dr. Singh said. As for the government’s failure to create an environment for rapid economic growth – a state which has often been described as policy paralysis – Dr. Singh blamed it on a lack of political consensus and sought to send a message to all parties on the dire need to bring about a conducive climate to usher in the much-needed reforms in various sectors of the economy.
Without referring to the UPA coalition government’s inability to push through several key reforms such as foreign investment in multi-brand retail, liberalisation in the insurance, banking and pension sectors, and a rejig of fuel and fertilizer subsidies, Dr. Singh said: “If we do not increase the pace of the country’s economic growth, take steps to encourage new investment in the economy, improve the management of government finances and work for the livelihood security of the common man and energy security of the country, then it most certainly affects our national security.”
Turning to the issue of attracting investment and creation of new employment opportunities, Dr. Singh said this would be possible only when trade and industry were encouraged and steps taken for speedy development of infrastructure. In this regard, he listed the measures in the pipeline pertaining to accelerated infrastructure development and fixing of ambitious targets in sectors such as roads, airports, railways, power generation and coal production, and referred to greater association with the private sector.
On attracting foreign capital, Dr. Singh reiterated that the government would have to create confidence among investors. “To attract foreign capital, we will have to create confidence at the international level that there are no barriers to investment in India,” he said.
The Prime Minister’s statement came in the wake of the till-recently raging protests by large sections of both domestic and foreign investors against the government’s budgetary proposals on retrospective amendments to the Income-Tax laws and the General Anti-Avoidance Rules (GAAR) to check tax evasion.
The Prime Minister’s Office has since set up an expert committee under the chairmanship of Dr. Parthasarathi Shome for reviewing the draft guidelines on GAAR and finalising a set of fresh norms for its implementation. The Shome committee is to submit its report by September 30.