Improving investment climate challenge for new govt: Gopinath

Harvard professor says job for the next finance minister is tough

The biggest challenge before the next government would be to push economic reforms and reduce uncertainties about taxation and regulatory practices, Harvard University professor Gita Gopinath said.

"The job for the next finance minister is tough. It is important to re-create an environment for growth in India, to undertake reforms that stimulate investment and improve the quality of jobs created," she said in an interview to PTI.

The general elections for the Lok Sabha had been announced. The polling will be held in nine phases beginning April 7 and the counting of votes will take place on May 16.

Gopinath, the first Indian woman to become a professor at the economics department of Harvard University, said, "the first (task before the government would be) to revive investment. This will require reducing uncertainty about tax and regulatory practices. It will require transparent and timely processes to clear projects."

Tax uncertainty remains a fundamental concern for global companies investing in India. The government's handling of the Vodafone tax case has evoked sharp reaction from global companies.

As regards growth, Indian economy has been expanding by over 9% before being hit by the global financial meltdown of 2008.

The economic growth rate in 2012-13 has slipped to a decade low of 4.5% and in the current fiscal it is estimated to rise to 4.9%.

Gopinath also underlined the need for fiscal prudence saying it was essential for improving investment climate.

"Serious effort has to be made to contain the size of the government and keep fiscal deficits in check," she said.

On Finance Minister P Chidambaram's resolve to bring down the fiscal deficit to 4.1% in 2014-15, Gopinath said, "in the last few years there has been a disconnect between targets set by the government either for the fiscal deficit, inflation or growth and what has later played out. So there is little credibility in these targets."

"There is a need to shake things up at the Finance Ministry. It is too much of the usual suspects doing the usual things. It is time for some change," she added.

Recently, while presenting vote-on-account, Chidambaram has said the fiscal deficit for the current financial year will be contained at 4.6% of GDP, down from the budget estimate of 4.8%.