PM warns of short term shocks, difficult economic reforms

Prime Minister Manmohan Singh on Friday said the government will now have to undertake more difficult reforms, including reduction of subsidy and implementing GST, to put economy back on the path of stable, sustainable growth.

New Delhi: Warning of "short term shocks" to the economy, Prime Minister Manmohan Singh today squarely blamed the BJP for the current economic woes, accusing it of stalling crucial reforms bills by disruption of Parliament and hurting investor sentiments.

Breaking his silence on the state of economy and the rapid slide in the rupee value, he made an elaborate statement in Parliament ruling out rollback of reforms and bringing in capital controls while appealing for a political consensus to put the economy back on path of high growth.

However, his efforts to weave a consensus did not meet with any success after he and the BJP got into a slug-fest over who was responsible for the current situation.

Responding to Leader of the Opposition Arun Jaitley, who talked about investors having lost confidence in the country, Singh told Rajya Sabha that he would be the last person to deny certain events and happenings in India which were a source of concern to domestic and foreign investors.

"What are those conditions. Parliament is the supreme body in our country. If Parliament is not allowed to function session after session," he said to strong rebuttals from the BJP benches.

Asserting that the government would act to reduce the current account deficit and fiscal deficit to bring improvement in the economy, the Prime Minister said they would make every effort to maintain a macro economic framework friendly to foreign capital inflows to enable orderly financing of the CAD.

The sudden dip in the exchange rate is "certainly a shock" but the government would address it through other measures and not through capital controls or reversing economic reforms.

Prime Minister said easy reforms of the past have been done but the country has more difficult reforms to do such as reduction of subsidies, insurance and pension sector reforms, eliminating bureaucratic redtape and implementing GST.

"These are not low hanging fruits and need political consensus. It is here that I urge Members across the political spectrum to reflect on the need of the hour.

"Many laws that are necessary are held up for lack of political consensus. Reforms such as the Goods and Services Tax, which everyone agrees is essential to restore growth, require States to come to an agreement.

"We need to forge consensus on such vital issues," he said urging political parties to join government's efforts to put the economy back on the path of stable and sustainable growth.

Singh said there may be short term shocks to the economy and "we need to face them."

"We will need to ensure that the fundamentals remain strong so that India continues to grow at a healthy rate for many years to come. That we will ensure. We are no doubt faced with challenges, but we have the capacity to address them," he said.

Seeking clarifications on the statement, Jaitley attacked the government for its "policy paralysis" and corruption that eroded investor confidence.

"Your idea of democracy is that when the government is in trouble, you need the help of opposition parties. This is the arrogance of Congress party and the government," he said referring to the Prime Minister's call for political consensus.

In uncharacteristic style, the Prime Minister hitback at the Opposition especially the BJP for stalling Parliament session after session and blocking passage of important economic legislations.

"Building of consensus is both the responsibility of government and the opposition. I wish the conduct of the opposition party was consistent while letting the ruling party govern," Prime Minister said.

Attacking BJP for continuously "opposing and criticising" the government, he said, "If the record of the last nine years is looked at, the principal opposition has never reconciled to the fact that it was voted out of power in 2004 and again in 2009."
Amid repeated disruptions and clashes between the Treasury Benches and the BJP, the Prime Minister noted that Parliament is the supreme body of the country but if it is not allowed to function session after session, investors' confidence will be affected.

Hurt at being repeatedly targeted by BJP, Singh told the Chair, "Have you heard of any country where the Prime Minister is not allowed to introduce his council of ministers...

"...Have you heard of Parliament in any country where the opposition rushes to the well of the House and shouts 'Prime Minister chor hai'. The type of things that have been said here...."

Jaitley shot back saying, "have you heard of any country where the Prime Minister has won the vote of confidence by buying MPs?", triggering an uproar.

As the Prime Minister made the unusually aggressive remarks against BJP, Jaitley shot back, "We would like to know what PM intends to do for reviving the economy. We don't want to hear alibis for failure."

Dissatisfied with Singh's statement and his replies to the clarifications, BJP members staged a walkout.

Singh earlier said it was not correct to say investors had lost confidence in India and noted that repeated disruptions of Parliament were affecting investor sentiment.

"I am not making a partisan point. But if you are worried about investors confidence, both domestic and foreign, the conduct of Parliament is an important factor," he said, adding "There is a need for consensus and building a consensus is that (job) of both."

Recognising that there is a problem that needs to be resolved, he asked BJP to recognise this.

"I do recognise that there is a problem. This can be resolved only if opposition does recognise its conduct in Parliament. This is not something that can be done unilaterally. It takes two to clap," he said.

Reminding the members that the issue of economy should not divide the country, Singh acknowledged that there was a problem of domestic and foreign investor being nervous as they get wrong signal.

"It is the responsibility of all members of this House to send out a message that India remains a viable, bankable and credit worth proposition. That is an obligation I invite all sections of the House to respect," he said.

On corruption, the Prime Minister said, "Corruption is there, has been there. But in recent years, the RTI and the activism of various agencies has brought out certain things which are regrettable...These activisms should not be used for disruption of Parliament."

He, however, said his government has "no desire to protect the guilty" and the investigative agencies and courts were doing their job in bringing the guilty to book.

On the missing files of coal block allocation scam, Singh said, "I am not the custodian of files" that led to uproar, with BJP members questioning him "Then who is?"

"I appeal to Leader of the Opposition and all members of the House to recognise that there is a collective responsibility we owe it to our country that India remains a viable, bankable, credit worth proposition. That is an obligation. I invite all sections of the House to respect," he said.