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Updated: August 31, 2013 11:13 IST

PM: need of the hour is more difficult reforms

Gargi Parsai
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Fundamentals of Indian economy continue to be strong, Prime Minister Manmohan Singh said on Friday. File photo: Rajeev Bhatt
The HIndu Fundamentals of Indian economy continue to be strong, Prime Minister Manmohan Singh said on Friday. File photo: Rajeev Bhatt

Prime Minister Manmohan Singh on Friday said the sudden decline in the value of the rupee was a “shock” but the government would address this problem through “other measures,” not by reversing the process of reforms or through capital controls.

Making identical statements in both Houses of Parliament, Dr. Singh sought a political consensus for carrying out “more difficult reforms” such as reduction of subsidies, insurance and pension sector reforms, eliminating bureaucratic red tape and implementing the Goods and Services Tax. Reforms such as GST were essential to restore growth and required States to come to an agreement.

The sharp and sudden depreciation of the rupee, he said, was due to unexpected factors such as the situation in Syria and the prospect of the U.S. Federal Reserve tapering its policy of quantitative easing as the U.S. economy was recovering. This led to a reversal of capital flows which was now sharply pulling down not just the rupee but also the Brazilian Real, the Turkish Lira, the Indonesian Rupiah, the South African Rand and many other currencies.

Prior to 2010-11, the current account deficit was more modest and financing it was not difficult. Since then, there had been a deterioration, mainly on account of huge imports of gold, and a higher cost of crude imports and recently, of coal. On the export side, “weak demand in our major markets has kept our exports from growing.” Exports were further hit by a collapse in iron ore exports. Taken together, these factors made “our current account deficit unsustainably large,” he said.

“Clearly we need to reduce our appetite for gold, economise on the use of petroleum products and take steps to increase our exports.”

Not only had the rupee been hit because of a large current account deficit, part of it was a needed adjustment as inflation in India had been much higher than in advanced economies. Therefore it was natural that there had to be a correction in the exchange rate to account for this difference.

“To some extent, depreciation can be good for the economy as this will help to increase our export competitiveness and discourage imports,” the Prime Minister said.

While admitting that there were several problems facing the economy and investor sentiment was affected, he said the country would face “short-term shocks” but expressed confidence that growth in the current fiscal would rise to 5.5 per cent, up from a decade’s low of 5 per cent in 2012-13.

“It is important to recognise that the fundamentals of the Indian economy continue to be strong. India’s overall public-debt to GDP ratio has been on a declining trend from 73.2 per cent of GDP in 2006-07 to 66 per cent in 2012-13. Similarly, India’s external debt is only 21.2 per cent of GDP, and while short-term debt has risen, it stands at 5.2 per cent of GDP. Our forex reserves stand at $ 278 bn, and are more than sufficient to meet India’s external financing requirements.”

The Prime Minister’s statement in the Rajya Sabha was marked by sharp exchanges between him and Leader of the Opposition Arun Jaitley after Dr. Singh charged the BJP with stalling crucial reforms Bills by repeatedly disturbing proceedings. In the Lok Sabha, several Opposition members staged a walkout, dissatisfied with his statement.

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To economize the usage of oil ,why are we not using CNG for public
transport system when the same is used in Delhi?Why India is not
having a policy for converting solid waste to Bio gas when all
agriculture universities,IIT,ISC is having the technology for the
same?Why we are not adopting to generate bio diesel from algae(waste
water) were we have a separate department in IIT? Why we have started
generating petrol and petroleum products from waste plastics(developed
in Annamalai university)?Why we have not started adding 15% ethanol to
petrol ?Does government have a hand in implementing the same?But
P.Chidambarams recent clearance of projects is in infrastructures
rather than for economizing of petroleum products.We have solution for
crisis but we dont have the right persons to implement the same.All
ministers are in flying and or not on the ground to feel the
realities.

from:  rajahkousikan
Posted on: Aug 31, 2013 at 11:16 IST

There can't be two opinions about the need for orderly functioning of the parliament. Both the ruling coalition and the opposition are equally responsible for disruption of proceedings and the same has caused considerable damage to the economy. Blame-game will not remedy the situation. Economy faces crisis situation and needs radical measures. Bring back the black money to strengthen national infrastructure; Collect the huge tax arrears from bigwigs to strengthen domestic industry and boost exports; Raise the whip against corrupt politicians and bureaucrats and unscrupulous businessmen and confiscate the ill-gotten wealth through appropriate laws to strengthen the agricultural economy to remove supply bottlenecks;lncentivise people to discourage investing in gold; Encourage innovation in transport systems and methods to reduce oil imports. A longer vision and brave leadership with strong political will is required to implement above measures and put the economy on right path.

from:  Dhanasekaran T
Posted on: Aug 31, 2013 at 09:21 IST

The "need of the hour" is for the Prime Minister of India to be in
reality the Chief Executive of the Country assisted by his cabinet and
responsible only to the people of this country as a whole represented
by its parliament.The PM can legitimately take credit for the
achievements of the government while at the same time owning
responsibility for its failures along with the concerned ministers.The
PM doesn't have to take guidance in regard to policies of the
governmement and approval of its actions from a centre of power
outside the government.

from:  K.Vijayakumar
Posted on: Aug 31, 2013 at 09:19 IST

Dear Mr PM: If as per your statement, the fundamentals of the economy are strong, why is the rupee falling? Or is it that we all need to agree to a different definition of "fundamentals of economy" which you alone are privy too?

from:  Dwarakanath Srinivasan
Posted on: Aug 31, 2013 at 07:42 IST

Why control on Gold import alone. Why don't we bring back the black money accumulated elsewhere.
Look at the number of cars plying on the road. There is a sharp contrast between the legitimate income one earns and the life style they live. Let us take the property price. A flat in Chennai costs 3 to 10crs and people buy just like that. I wonder how long this can last.

from:  A Kumar
Posted on: Aug 30, 2013 at 17:32 IST

Finally it turns out the villains are US Gov and because of US the domestic problems. So we really should not blame the GOI or the most eminent economist in the World, The PM.

from:  daisydoe
Posted on: Aug 30, 2013 at 17:25 IST

What a shocking statement our Prime minister is making. He has not even bothered to bring in the black money stashed away to tax haven countries by big capitalists and politicians. He has not bothered to bring out the black money within the country, instead he wants the common man to bear all the brunt for the mistakes he and his party having been committing for the last 20years of their being in power.
He is very magnanimous in offering tax concessions etc to big corporates but at this critical juncture he wants the common man to bear the brunt. Wonderful economist, he and his colleagues shud be made more accountable for this disastarous situation.

from:  K.GOPU
Posted on: Aug 30, 2013 at 17:10 IST

Reduction in import of fuel oil by encuraging public transport instead of cars, tax on cars eqailent to road and parking space costs as in Singapore can reduce import bill the most. 96% vehicals on road are cars but tax paid by these amount to 1% of road costs. Railways efficiency and development needed for saving in fuel consumption by divinding Railways at state/region level to have competion instead of manoply. Tax collection should be equal to expenditure plus trade deficit yearly.

from:  AK GOEL
Posted on: Aug 30, 2013 at 17:05 IST

We need to take this as an opportunity to cut our oil consumption wherever possible. It is obvious we cannot cut the oil spending in Vehicle usage. May be Government can encourage people to start installing renewable energy sources to power their houses and our researchers can start looking at these kind of options aggressively. If we cannot move in this direction then be ready to face the same situation in another few years.

from:  Avinash
Posted on: Aug 30, 2013 at 16:25 IST

The problems of power production, water resources should be tackled as well as corruption. 24 hour power for the consumers should be produced. This should be the aim of the govt. Water is available when it rains. Lean months water should be stored. It should not go to the sea. Enough dams should be built. All the occupied lakes, unused lakes should be desilted and filled with water. Abuse of the lakes and other water bodies should be deletwith. Perennial water supply can be given by linking the rivers all over the country. Water should made as a central subject. By providing enough water,agricultural production will be high. If these basic and fundamental things are looked into the economy will improve.

from:  K Natarajan
Posted on: Aug 30, 2013 at 16:15 IST

A day will soon come when we will hear that for all the scams and economic ills afflicting
India , every one outside of the GOI is responsible in one way or the other and it will be
therefore wrong to blame the government headed by Dr.Singh , under the guidance of the
UPA Chairperson.

from:  Shekar
Posted on: Aug 30, 2013 at 16:06 IST

Mr PM, Having assumed office on 2004, didn't you had ample time to
shape the economy of India? Having an excellent track record of
holding prestigious financial posts in your career, can't you frame a
roadmap for our country after you have assumed office? Eight years
gone, and where we stand now. Highly dependant on western economies.
Haven't we had enough time bringing up our manufacturing sector and
become self-reliant? At the end of your tenure, rupee has reached
record low. Now you say measures should have been stringent. Please
think of those 9 years you have been heading our country. Having
passed out from highly prestigious institutions like Cambridge, don't
you think you should have implemented excellent plans making our
country stronger.

from:  Sathya Narayanan
Posted on: Aug 30, 2013 at 16:00 IST

the fundamentals are strong. But what are they, let the people know
where they stand. On one hand the P.M says subsidies must be reduced,
but on the other hand freebies are being roiled out in the name of food
bill. the educated middle class cannot digest this. They are left
strangled with falling economy with more and more middle class moving
towards the poor.

from:  J. venkataramana
Posted on: Aug 30, 2013 at 15:44 IST

@VSBALA SUBRAMANIAN
Sir, why you are targeting Bank officers? PSUs are spread across
length and breadth of India. And except for our major metros, there is
not functioning Public Transport. Plus, officers many a times are
required to roam around for the work, how will they arrange the travel
expenses?

If you really wish to do something about saving fuel. Here is what you
should understand:
1. Our luxury cars run on the "subsidied" fuel called Diesel
2. Our mobile towers run on diesel fueled generators. They could
easily use solar energy, but they wont because, diesel is cheap and
solar will need investment.
3. ARAI gives permissions to the vehicular models. If it could act
sensibly, we could have better models running on our roads.
4. There is immense potential to improve public transport, especially
in Tier 2 and 3 cities.

Kindly spare Bank officers, go after the real culprits.

PS: I am not a bank officer.

from:  Mahesh J
Posted on: Aug 30, 2013 at 15:33 IST

Non- vital imports must be controlled manufacturing strengthened, delays due to judicial intervention in mining and other industries that help exports must be ended and buying of oil from Iran using rupee should be resorted to.

from:  Shakeel Mohammed
Posted on: Aug 30, 2013 at 15:30 IST

The fuel consumption should be fought with vigorously.The PSU /Bank officers are paid @70 ltrs of petrol as conveyance .This should be substituted with free Bus pass till the fuel crisis is resolved.An additional taxRs @200 per person per annum will yield a sizable amount.All the political parties should be lived @15000 pm will yield a good amount without affecting the common man.Traffic signals should be regulated to avoid wasting time at signals and traffic jam should be attended immediately to avoid the waste of fuel

from:  VSBALA SUBRAMANIAN
Posted on: Aug 30, 2013 at 13:02 IST

Mr, MMS told only about the external factortoday and few days back MMS
told few internal factors are also responsible.
What a U-turn... in this way the govt is not responsible for this only
factors not uch governed by the country are involved...

from:  ankit
Posted on: Aug 30, 2013 at 13:00 IST

When India was growing during 2007 to 2009 then whole world was in a recession these same people told us we are decoupled with world as it is Indian internal growth story with internal consumption.

Does India has institutions or industry which were created during growth times so that now they can capitalize falling rupee by exporting the articles?

Now just after 3 years very same leaders stating it is because of external factors, should common man believe in their remarks?

from:  Deshpande
Posted on: Aug 30, 2013 at 12:57 IST

Yeah right!!! and the Governor of RBI is lying ?

from:  Sushant
Posted on: Aug 30, 2013 at 12:55 IST
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