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Dec 27, 2012, 10.01 PM IST | Source: CNBC-TV18

What makes finance ministry optimistic about year ahead

Global headwinds on one hand and a domestic slowdown on the other, the Indian economy has had a challenging 2012. However, as we roll over to 2013, the Finance Ministry in the year-end report, strikes a positive chord.

Global headwinds on one hand and a domestic slowdown on the other, the Indian economy has had a challenging 2012. However, as we roll over to 2013, the Finance Ministry in the year-end report, strikes a positive chord. He said that the govt has taken several initiatives to revive sentiment and the economy is headed towards gradual recovery and stabilising growth.

Also read: See rupee at 54-56/USD till budget session: Moses Harding

The economy is getting back on track is the message from North Block.

According to the Fin Min's Year End review, there is an upturn in the Business Expectations Index for the October-December quarter. The PMI has moved up in November. There is buoyancy in capital markets and improved internal accruals in the corporate sector. The fiscal deficit is expected to be contained at 5.3 percent.

Some of the initiatives taken at the policy level by the Fin Min this year are as follows:

One of the 2 big successes for the FM in 2012 was - rolling out divestment. Though only Rs 6900 cr has been realized so far of the Rs. 30,000 crore. The first two sales; Hind Copper and NMDC were a success. Secondly, the setting up of the Cabinet Committee on investment which will fast track large infra projects is also seen as a positive.

Other than these, several initiatives were announced to renergise different sectors.

Steps taken for the Mutual Fund space included increasing the reach of MF products and energizing the distribution network by permitting fungibles of Total Expense Ratio (TER). This would enable AMCs to pay higher upfront commissions to distributors. Also, measures were announced to strengthen the regulatory framework for MFs and Protect Investor interest.

The Fin min also sought to improve market sentiments by encouraging more participation by retail investors in IPOs as well as through the new tax saving. "Rajiv Gandhi Equity Savings Scheme" meant exclusively for first time retail investors.

Also, the FM tried to facilitate capital rising by issuers by reducing the requirement of average free float market capitalization.

Measure were also undertaken to curb tax evasion and black money. However, with GDP growth at 5.4 per cent, in the first half of the current fiscal year and Inflation still stick above 7%. Analysts say these steps are just the beginning.

Also read: Indian economy likely to grow at 6.3% in 2013: RBS

Sustained and impact-full policy measures are needed if India is to get back to the 12th Plan's aim of 8% growth levels.

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