Economy facing temporary downturn, can grow at 8%: PM
New Delhi: Terming the 5 percent GDP expansion as clearly disappointing, Prime Minister Manmohan Singh on Wednesday made a case for speedy and decisive actions to achieve 8 percent economic growth.
Addressing the CII AGM here, Singh said the government will further relax the FDI policy and take steps to bring down inflation.
Singh also said India can get back to the high growth path of 8 percent even while dealing with problems like corruption, bureaucratic inertia and the difficulties in managing coalition.
"Growth has slowed to 5 percent, which is clearly disappointing ... We are seeing temporary downturn, partly due to global factors. We can get back to 8 percent growth rate," Singh said, adding that government will take speedy and decisive action to push growth.
Observing that the high fiscal deficit is unacceptable, Singh said "We are determined to do everything possible to achieve the fiscal deficit target".
As per the road map, the government aims to bring down the fiscal deficit to 3 percent of GDP by 2016-17.
As regards the Current Account Deficit (CAD), he expressed hope that it would moderate in the current financial year from a high of 5 percent recorded in 2012-13.
The government, he said, will take all steps to ensure that foreign fund flows remain strong and restore the macro-economic balance.
"Corruption is a problem. Bureaucratic inertia is a problem. Managing coalition is not easy. But these problems have not arisen suddenly. They were all there even earlier when the economy was growing at 8 percent", Singh added.
The Prime Minister said: "Business mood which was unduly optimistic in 2007, is unduly pessimistic today ... I would urge Indian industry to have faith in our determination and avoid getting swamped by negativism".
He said fiscal expansion has led to an expansion in the CAD, which is expected to be around 5 percent of GDP in 2012-13.
"We financed a CAD of USD 90 billion in 2012-13 without a loss in forex reserves," he said adding the government will take all steps to "ensure that inflows remain strong for the next two years".
Singh said the Cabinet Committee on Investment (CCI), set up in December 2012, has made significant progress in clearing large projects which were held up for long.
In the petroleum sector, he said investments worth USD 20 billion for exploration and production activity in 40 oil blocks had been held up for many years because of security clearances.
"The CCI has made a difference. Clearances have been given for 5 blocks. We hope to resolve issues relating to another 31 blocks within the next two weeks.
"I believe the progress we have achieved is particularly significant because these blocks were awarded many years ago, but were held up for want of clearances," he said.
The Prime Minister further said the fuel supply -- both coal and gas -- to power projects has been posing problems.
"The ministries are working to reach a resolution of these problems in a time bound manner. I hope we will see results in the next three weeks," he said.
India welcomes foreign investment, Singh said adding "liberalisation of FDI in multi brand retail, civil aviation and other areas, are important signals. We are reviewing the FDI policy comprehensively to see what more can be done in the coming months".
He said restoring macro-economic balance, among other things, is essential for revival of investment.
The growth rate of economy is strongly co-related with investment rate, he said, adding both public and private investment declined in 2011-12 as a share of GDP.
"This decline in investment must be reversed. The most important thing we can do to revive investment climate domestically is to deal with the many impediments affecting the implementation of infrastructure projects," he said.
The CCI, he said, has streamlined the processes of granting environment and forest clearances for mega projects.
"Clearances for 12 coal mining projects have been fast tracked. These projects would add 37 million tonnes to our annual coal production," he said.
In the power sector, the CCI has resolved issues relating to the NTPC's proposed 2,000 MW project in Jharkhand's North Karanpura area.
"This project, to be built at a cost of Rs 14,000 crore, had been pending for the last 13 years because of differences between the ministries of Power and Coal," Singh said.
He further said the government is contemplating other reform measures, including considering the recommendations of the Financial Sector Legislative Reforms Committee.
"The Land Acquisition and Rehabilitation and Resettlement Bill has been cleared by the Cabinet and will soon go to Parliament," he said.