PM wants revival of economy with 'animal spirit'
New Delhi: Signalling his keenness to boost the economy a day after taking charge of the Finance Ministry, Prime Minister Manmohan Singh on Wednesday directed urgent steps for revival of investor spirit and reversal of the climate of pessimism with regeneration of "animal spirit".
Taking stock of the country's economy in a series of high level meetings here, he identified tax issues, sluggishness in insurance sector and aspects related to mutual funds as problem areas and pressed for quick corrective steps.
The meetings were attended by Planning Commission Deputy Chairman Montek Singh Ahluwalia, PMEAC Chairman C Rangarajan and top Finance Ministry officials. He will meet RBI Governor D Subbarao and Planning Commission members tomorrow as part of his review of affairs concerning the economy.
Contending that he had been "away from the details and nitty gritty of finance for a long time", the Prime Minister told officials of the Finance Ministry that there have been many factors that have contributed to the general negative mood being witnessed in the country.
"We need to work to get the economy going again and restart the India growth story," he said, against the backdrop of slowdown in the GDP growth, which slipped to a nine-year low of 6.5 per cent in the last fiscal.
"Reverse the climate of pessimism... Revive the animal spirit in the country's economy," Singh said, while observing that India was passing through challenging times economically.
He noted that the growth rate has taken a dip, industrial performance is not satisfactory and "things are not rosy" on the investment front while inflation remains a problem.
"In the short run, we need to revive investor sentiment, both domestic and international," he said.
Talking about the problems, Singh said he referred to the "tax front", mutual fund segment and slowdown in insurance sector "which is not normal in a country with large unmet insurance needs".
"This needs to be looked into," he said but did not elaborate.
"Immediate emphasis is to manage, balance of payment for which all policies should be directed to help institutional flows to India," the Prime Minister said, a day after Pranab Mukherjee quit as the Finance Minister to contest the Presidential poll.
On the external front, Singh said he was concerned about the way the exchange rate is going.
His statement comes at a time when the value of rupee has been depreciating sharply and breaching the 57 mark against the US dollar.
"Investor sentiment is down and capital flows are drying up," the economist-Prime Minister regretted.
"There are some external reasons and we need to work towards making our country resilient in meeting these external challenges. However, there are many domestic reasons as well. We need to address these quickly. We need to work to get the economy going again and restart the India growth story," he said.
He said that in the short run, "we need to revive investor sentiment, both domestic and international".
"There are some issues we must address in the short run and some in the long run," Singh said.
The discussions covered controlling fiscal and current account deficits in the wake of concerns shown by the global rating agencies on these counts. The fiscal deficit in 2011-12 was 5.76 percent and current account deficit at four per cent are quite high for the economy.
Singh has taken charge of the finance portfolio at a time when the economic growth has plunged to nine-year low of 5.3 percent in the last quarter of 2011-12.
With stock market witnessing capital outflows and rupee depreciating over 25 percent in a year,controlling inflation remains a big concern as well.
"Millions of our countrymen look upto the government to throw open channels for their progress, prosperity and welfare," the Prime Minister said at the meeting.