Economic downturn temporary; will carry reforms ahead: PM

Moneycontrol Bureau

The Indian economy is facing a temporary downturn, and average rates of economic growth above 8 percent are possible in the medium term, Prime Minister Manmohan Singh told a gathering of the nation's top businessmen on Wednesday. India's economy, hit by the global slowdown and stubbornly high inflation, probably grew around 5 percent in the financial year ended on March 31, the slowest pace in a decade and a far cry from a near double-digit growth seen in the early 2000s. The government is hopeful of a better performance in the new fiscal year and has pegged the annual economic growth to be as high as 6.7 percent. While admitting that the government's decision making had slowed down, Manmohan said there is need for corrective steps to spur growth, reduce fiscal deficit so that the decline in investments is reversed. "We need to create growth process that is truly inclusive," he told industry members. Describing the business sentiment as unduly pessimistic, Manmohan said that the government and the industry have to work together to push growth. He also promised steps to speed up infrastructure projects. "I don't think dynamic growth achieved in past can't disappear suddenly," he said at the meet.

Displaying the Government's readiness for improving the industries, Singh said, "In the power sector, issues relating to the NTPC's proposed 200 MW plant in Jharkand have now been resolved. This project, to be built at a cost of Rs 14,000 crore, has been pending for the last 13 years because of differences between the ministries of power and coal."

Singh said, "I have often heard it being said that the Government had become irrelevant because India would grow at 9% irrespective of what the Government does. The consensus today is that unless the Government acts swiftly, our growth, which is already decelerated, will perennially be stuck at 5%. Naturally, I welcome the rediscovering on the part of business the importance of the Government." Blaming the alarming rate of current account deficit of the country on fiscal expansion, Singh is hopeful of the figure to moderate in FY14. He says the economy must cope with weak exports and high CAD. "We will do everything to ensure that inflows remain strong for the next two years. It's important to ensure that financial strength is there to support investment instead of being absorbed by the government deficit." The Prime Minister, while admitting that corruption and bureaucratic inertia are plaguing the UPA, said that running a coalition government is not easy. However he also added these problems existed even when the economy was growing at eight percent. "Corruption is a problem. Managing a coalition government is not easy," said Singh.

Assuring action in the petroleum sector, Singh said, “In the petroleum sector, investments worth USD 20 million for exploration and production activities in 40 oil blocks CCI has made a difference. Clearances have been given for 5 blocks. We hope to resolve issues relating to another 31 blocks within the next two weeks." (With inputs from agencies)