Absence of reforms will slow growth: Chidambaram
New Delhi: Cautioning that absence of economic reforms will slow down growth, Finance Minister P Chidambaram said Monday political parties may oppose but should not obstruct decision making.
"Every government is entitled to lay down policies. Opposition to policies is legitimate, obstructionism is not," Chidambaram said while addressing the annual Economic Editors' Conference.
"The government of the day must be allowed to lay down policies, pass legislations wherever necessary, and get on with the job of implementing those policies," he added.
Noting that these were challenging times, the Minister said, "Without reforms, we risk a sharp and continuing slowdown of the economy which we cannot afford given the imperative need to generate jobs and incomes for a large population, most of whom are young."
India's economic growth during 2011-12 slipped to nine- year low of 6.5 percent and during the first quarter of the current fiscal it was 5.5 percent.
Expressing confidence that with requisite savings and investments India's economic growth rate will recover to 8 percent and more, and perhaps touch 9 percent, the Minister said, "We should keep that rate of growth as our objective and progress towards achieving that objective."
The government recently took host of reform initiatives but steps like hiking FDI cap in insurance and pension to 49 percent would require legislative changes, which would not be possible without the support of main opposition party BJP.
"Long standing structural reforms required to achieve high investment and high growth rates have been held back because of many reasons.
"Among them are...The need to forge a consensus on reforms, the practical necessity to garner support across the political spectrum to pass legislation... Nevertheless we are now addressing the difficult areas of reforms", he added.
Referring to the government decision to allow FDI in multi-brand retail, Chidambaram said, "We must not fear foreign investments in India. We have the sovereign right to decide where and how foreign investments would be allowed into India."
The decisions to allow foreign investment should not be tested on the basis of undefined ideology or theory, but on a clear-headed assessment of the advantages that would accrue to India, he said.
"I have no doubt...FDI in retail, aviation and FM radio broadcasting are decisions that will benefit the economy and the country," he added.
Chidambaram also underlined the need for containing inflation and said that appreciating value of the rupee would help in brining down the cost of imported crude, petroleum products and fertilisers.
"The value of rupee is an important factor that effects the value of imports. A depreciating rupee will also impact trade and investment. Hence, the need to stabilise the exchange rate. I believe that we have met with moderate success," the Minister said.
The rupee, which touched 57.22 to a dollar on June 27, 2012, has gradually appreciated to 52.13.
The other important task before the government was to contain fiscal deficit, he said, adding, "no one will have confidence in the Indian economy if there is uncertainty about the fiscal stability of the country".
As regards the Kelkar Committee on fiscal consolidation, the Minister said that it has presented the worst-case scenario and it was the duty of the government to take steps to avoid that and "do everything possible to contain deficits".
The government, Chidambaram added, will shortly announce a fiscal consolidation programme based on the feedback on the Kelkar Committee report.