Ease regulatory, bureaucratic impediments to investments

Lower interest rate regime could give filip to investment only if various hurdles are removed

Government should work towards easing "regulatory and bureaucratic impediments" to improve investment climate in the country, suggested the Economic Survey for 2012-13.

Amid grievances that RBI's tight monetary policy is impacting economic activities, the Survey said a lower interest rate regime could give a fillip to investment only if various hurdles are removed.

"Lower interest rates could provide an additional fillip to investment activity for the industry and services sectors, especially if some of the regulatory, bureaucratic, and financial impediments to investment are eased," the Survey/

 

Given the global uncertainty, the country needs to quickly restore balance in domestic economy, it added.

"The government is committed to fiscal consolidation. This along with demand compression and augmented agricultural production should lead to lower inflation, giving the RBI the requisite flexibility to reduce policy rates," it said.

The RBI, which has been maintaining a tight monetary policy, had cut key interest rate (repo rate) last month by 0.25% to 7.75%.

The Survey said India is caught in a vicious circle of falling growth and stimulus withdrawal. Also, the country's increased dependence on foreign borrowing is a cause of concern.

The way out and the hope for starting a virtuous circle lies in shifting the national spending from consumption to investment, removing bottlenecks to investment, growth, and job creation, combating inflation, both through monetary and supply-side measures, it said.

Also, reducing the costs for borrowers to boost investment and increasing opportunities for savers to get strong real investment returns were required, it added.

Government has taken several steps like further liberalisation of FDI policy and setting up of a Cabinet Committee on Investment to fast track investments.