'India poised for return to 9% growth'

The objective is to harness growth to make the development process more inclusive, strengthen food security, improve educational opportunities and health facilities.

Finance Minister Pranab Mukherjee today said that the Indian economy was poised to return to the 9 per cent growth path despite signs of a slowdown in the manufacturing sector for the last few months.

“The challenge now is to quickly revert to the high GDP growth path of 9 per cent-plus and even find the means to cross the ‘double digit growth barrier’ in the coming year or two. Our objective is to harness this growth to make the development process more inclusive, strengthen food security, improve education opportunities and health facilities both in rural and urban areas to make good our promise of making growth more equitable. At the same time we are looking to address the weaknesses in our systems, structures and institutions at different levels of governance,” Mukherjee said in his address at the three-day India Economic Summit, which opened here today.

On Friday, Mukherjee had expressed concern when the latest data revealed that industrial growth had decelerated to a 16-month low of 4.4 per cent in September. In the previous month, the growth rate had slowed down to 6.9 per cent, from nearly 15 per cent in July. The data showed that four of the 17 manufacturing segments had contracted, while another five grew at less than five per cent. These nine groups have a combined weight of 42.8 on the index of industrial production.

While economists had also expressed surprise at the pace of deceleration, the finance minister has so far refrained from making detailed comments.

At the India Economic Summit, the minister appeared to be in a mood to list out the positives and listed the steps that had been initiated to bolster the growth process. He listed out tax reforms — the proposed shift to Goods and Services Tax and the Direct Taxes Code — financial sector reforms and foreign direct investment among areas where the government had already moved.

For the medium to long-term, Mukherjee listed out several factors that provided comfort to policymakers. For instance, he pointed out that the savings rate will rise further in the next two decades, provided productive employment opportunities are created at the pace at which the working population increases.

Similarly, he said that the arrival of India’s corporations in the global marketplace and the sophisticated corporate culture that many of these companies exhibit, lends an optimistic prognosis for the economy in the medium to long run.

At the same session, World Economic Forum’s founder and Executive Chairman Klaus Schwab outlined some of the shared values that are likely to emerge in the new paradigm, ranging from the rise of the next generation to a redefinition of the work environment. He suggested that the G-20 process, which includes the world's most powerful economies, needed to be made more participative. Besides, he said that social entrepreneurs would play a big role in the coming days.
 

STEPS TO IMPROVE INVESTMENT ENVIRONMENT
In order to improve the investment environment in India, the Finance Minister highlighted the following measures taken by the government: 

• Despite the general decline in global capital flows, India has experienced robust foreign direct investment flows in the last two years. This can be attributed to the simplification of the FDI regime to make it easily comprehensible to foreign investors.
• As part of financial sector reform, India has decided to set up an apex level Financial Stability and Development Council (FSDC), in order to strengthen and institutionalise the mechanism for maintaining financial stability. This Council will undertake macro prudential supervision of the economy, including the functioning of large financial conglomerates and address inter-regulatory coordination issues. Other aspects that the Council will look into include financial literacy and financial inclusion.
• The government has also decided to set up a Fiscal Sector Legislative Reforms Commission (FSLRC) to rewrite and clean up financial sector laws and bring them in line with the requirements of the sector.
• In relation to banking reforms, the finance minister pointed out that the cost of banking intermediation in India is high and bank penetration is limited to only a few customer segments and geographies. The finance ministry is working in collaboration with the RBI to deal with this shortcoming.
• The new Direct Taxes Code has been unveiled and efforts are underway to reform the indirect tax regime by introducing a country wide Goods and Services Tax.
• Infrastructure investment has been robust and the Government's projection is to spend $1 trillion in the Twelfth Plan (2012-2017).