Against the backdrop of the battle against the sovereign debt crisis in the Eurozone, Prime Minister Manmohan Singh has said there will be no change in India’s financial sector priorities to sustain high rates of economic growth.
“Financial inclusion, provision of long-term funding instruments for infrastructure, the development of liquid bond markets to improve monetary policy transmission, among others, were financial sector priorities in India before the crisis,” Dr. Singh said in his intervention at the Summit of world’s leading 20 economies yesterday.
“Nothing has happened in Indian financial markets or globally that warrants changing these priorities. We need to be sure that the regulatory reforms being introduced globally will not hamper this process,” he added.
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India’s concerns were different, Dr. Singh said, adding, “the banking capital needs to be strengthened in India, this is not on account of higher risks but because credit is projected to expand at a very fast pace to feed the high real growth that we expect”.
Pointing out that tax payers and equity holders in case of the Indian PSU banking sector are the same, he said, “In this environment it is difficult to see why a financial sector tax, which would only raise the cost of capital even further, would be appropriate.”
As regards the Indian economy, Dr. Singh said, “our economy has slowed down in the current year and GDP growth is likely to be between 7.6 and 8 per cent...We in India are taking steps to ensure a return to high growth. We hope to go back to higher growth in 2012-13, together with a moderation in inflation”, he added. “Our medium term strategy focuses on a revival of investment especially in infrastructure, and continuing efforts to reduce our fiscal deficit through improved revenue collection which is expected to come from tax reforms,” Dr. Singh said.
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The Prime Minister also warned that “prolonged” uncertainty and instability in Europe will hurt other countries too and suggested that the IMF could help rescue the situation.
Observing that everyone has a stake in the orderly functioning and prosperity of Europe, including the Eurozone countries, Dr. Singh said, “prolonged uncertainty and instability in the Eurozone countries can hurt us all. In an increasingly integrated world, all of us have a stake in the orderly functioning and prosperity of Europe.”