Fiscal consolidation will reverse slippages caused by stimulus packages
Taking off from where he left a day ago on the ‘fascinating’ growth story, Finance Minister P. Chidambaram on Saturday maintained that with the government in the process of easing FDI (foreign direct investment) norms and putting in place a system of fast track clearance to speed up implementation of mega projects, the India story of investment is ‘just starting out’.
“We have permitted FDI in areas such as multi-brand retail, power exchanges, aviation and broadcasting…As I am fond of saying, India’s story on investment is just starting out,” Mr. Chidambaram said while addressing the First Business Session of the 46th annual meeting of the Asian Development Bank (ADB) being held at Greater Noida in the national capital region.
The Finance Minister, who is also the Chairman of the ADB Board of Governors, pointed out that with a number of projects plagued by ‘last mile’ bottlenecks in fuel supply, environment clearance, forest clearance, land acquisition and other constraints, a Cabinet Committee on Investment (CCI) has been set up to accord fast track clearance to such projects. The recent liberalisation in FDI norms have also paid dividends in that Malaysian budget carrier AirAsia has joined hands with Tata Sons and Telestra Tradeplace to launch a new carrier in the country. Asserting that the government was determined to accelerate the pace of inclusive growth along with macroeconomic stability, Mr. Chidambaram said: “We are committed to fiscal consolidation. It will reverse the slippages that took place as a result of the stimulus packages [extended to combat global slowdown],” he said.
On the fiscal side, Mr. Chidambaram informed the Board that the government was committed to bring down the fiscal deficit as a proportion of GDP to 3 per cent by 2016-17. “This we will achieved by a prudent combination of revenue enhancement as well as expenditure rationalisation,” he said.
As for India’s engagement with the ADB, Mr. Chidambaram said he was pleased to note that the Bank is now embarking on supporting initiatives in skills development. To take the process forward, he urged ADB to explore ways of deploying its expertise in energy, logistics and skills development around the economic zones under development in the country.
“ADB can not only partner in these efforts but also actively pursue the potential of a corridor linking India, Bangladesh, Myanmar, ASEAN and People’s Republic of China,” Mr. Chidambaram said while highlighting the avenues available for investment and suggested a role for ADB in developing special financing vehicles to support infrastructure and utilities.
“In doing so, ADB must build upon its recently approved innovative project — supporting credit enhancement of infrastructure project bonds so as to enable infrastructure developers to tap the vast resources available with insurance firms and pension funds,” he said.