Amid India’s economic growth shrinking to a nine-year low of 6.5 per cent in 2011-12 and impatience over the slow pace of reforms increasing, Prime Minister Manmohan Singh on Tuesday said the country would soon revert to a growth rate of eight to nine per cent a year.
He, however, added 6.5 per cent growth seemed reasonable, given the all-round slowing of economic activities across the world.
Singh reassured his countrymen, as well as foreign investors, of the India growth story, promising steps to revive investor sentiment in the country. He assured investors his government wouldn’t change policies abruptly.
“Our public is impatient for a return to high growth and faster job creation,” he said at the G-20 SUMMIT here. “The fundamentals of the Indian economy remain strong, and we are confident of bringing back the rhythm of high growth of eight to nine per cent a year,” he added.
The global downturn, especially the impact on capital flows, had taken a toll, Singh said, adding internal constraints had also affected performance and his government was working to correct these. “We are taking steps to revive investor sentiment. We are determined to create an environment that would boost investor sentiment and promote an atmosphere conducive to enterprise and creativity. Our policies would be transparent, stable and designed to provide a level playing field to both domestic and foreign investors.”
Analysts have attributed the sagging investor sentiment to certain tax proposals, as well as global uncertainties.
Singh said India was focusing on infrastructure investment and his government had put in place a problem resolution mechanism to overcome implementation bottlenecks.
The prime minister also reiterated his commitment to reining in subsidies to narrow fiscal deficit, even if it meant taking tough decisions. However, given food inflation stood at double digits for the third month in May, steps like decontrolling diesel prices would not be easy. Singh did not give any commitment on this issue. He, however, said he hoped the Aadhaar scheme would help the government minimise leakages in subsidies.
India, like many other countries, allowed fiscal deficit to widen after 2008 to impart a stimulus. “We are now focusing on reversing the expansion. This would require tough decisions, including ones to control subsidies, which we are determined to take.”
India’s fiscal deficit soared to 5.7 per cent of the gross domestic product (GDP) in 2011-12, against an optimistic Budget estimate of 4.6 per cent.