 "More FDI reforms on cards: PM")
“More FDI reforms are on the anvil,” Singh said, adding the government had to be proactive when “things go badly”.
Earlier this week, Singh, after a meeting with senior colleagues, had decided to raise the FDI caps on telecom and asset reconstruction companies to 100 per cent. The FDI cap on defence production was virtually raised to 100 per cent, subject to approval by the Cabinet Committee on Security. Besides, the FDI cap on credit information companies was raised from 49 per cent to 74 per cent.
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“The most immediate cause of worry is the recent volatility in foreign exchange markets. Much of this was due to global markets reacting to the likelihood of a withdrawal of QE III (the third round of quantitative easing by the US Federal Reserve),” he said.
He admitted the high CAD had compounded the woes on the rupee front. However, the depreciating rupee would help increase exports, he said, addressing the annual general meeting of the industry chamber Associated Chambers of Commerce and Industry (Assocham).
Though conceding economic growth this financial year would be lower than the Budget estimate of 6.5 per cent, Singh exuded confidence it would record a turnaround from a decade-low of five per cent in 2012-13.
On the Bharatiya Janata Party (BJP) questioning his government’s handling of the economy, Singh said his political critics were giving good television bytes but a distorted picture of the economy. He also allayed fears within certain quarters of India Inc that the Reserve Bank of India’s recent move to raise short-term interest rates would result in a high interest rate regime in the long run.
Countering the popular notion that public sector undertakings (PSUs) weren’t investing despite sitting on huge cash, Singh said in 2012-13, about Rs 1,20,000 crore had been invested by major PSUs.
The high CAD of 4.8 per cent of gross domestic product in 2012-13 had aggravated the problem of rupee depreciation, the prime minister said, adding, “I can assure you we are committed to bringing down the CAD and for that, both demand and supply sides of issues have to be addressed. We will use all policy instruments available — fiscal, monetary and supply-side interventions — to ensure CAD declines further over time.” He said recent measures to reduce the demand for gold had borne fruit, with gold imports declining sharply in June. During the month, these imports fell to $2.45 billion from $8.4 billion in May, narrowing the country’s trade deficit to $12.25 billion from $20.1 billion.
However, the positive impact of the measures taken to correct petroleum prices had been slightly dented due to the depreciation of the rupee against the dollar, he said, adding the under-recoveries of oil marketing companies for diesel had declined from Rs 13 a litre to less than Rs 2 a litre.
Singh said the depreciation in the rupee would boost exports. “Of course, there is a lag before this benefit would be felt, in terms of export volumes, but orders being booked from now would certainly benefit.” In the quarter ended June, exports declined 1.4 per cent to $72.45 billion, against $72.45 billion in the corresponding period last year. In 2012-13, exports declined 1.76 per cent year-on-year.
The government was trying to remove the constraints on the export of iron and other ores, which saw a considerable decline through the last year, the prime minister said.
Reposing faith in the competitiveness of India Inc, he said it was this that had prompted the government to enter into the comprehensive economic partnership agreement with the Association of Southeast Asian Nations and Korea. “We are hoping to conclude a similar agreement with the European Union soon,” he said.
On the measures taken by the government to address infrastructure issues, he said all plants commissioned by 2015 would have adequate supplies of coal, comprising both domestic and imported coal.
Without naming anyone, the prime minister implicitly ridiculed BJP’s poll campaign committee chief and Gujarat Chief Minister Narendra Modi, as well as other BJP leaders, for focusing on just one bad year of the United Progressive Alliance (UPA) government’s rule. He said in eight years of UPA rule — from 2004-05 to 2012-13 — average growth stood at 8.2 per cent, against 5.7 per cent in the previous eight years.
Besides, the percentage of population below the poverty line had declined 0.75 per cent a year before 2004-05; it fell more than two per cent a year between 2004-05 and 2011-12, the prime minister said.
NDA launches scathing attack
Meanwhile, BJP president Rajnath Singh launched an attack against the prime minister, saying a leader should be a realist, not just an economist. He said emphasised if the BJP-led National Democratic Alliance was voted to power, the alliance would “put the economy back on track within a few years.”
“A leader should have vision and confidence. If you really want to make this country a vibrant India and an economic power, if we wish to enhance its stature and credibility at international level, the leadership should have a vision and firm conviction. Only such a person can make a vibrant India, which is an economic power in the world. I did not find that conviction and confidence in the prime minister’s speech today,” said Rajnath Singh, who, along with Shiv Sena chief Uddhav Thackeray, was invited to the 92nd annual session of Assocham---‘The Vision of a New Vibrant India’.
Former finance minister and BJP leader Yashwant Sinha said in his speech at the Assocham session, the prime minister hadn’t mentioned the five per cent growth the country had recorded last year. Instead, the prime minister had chosen to talk about the average growth in the last eight years, Sinha said. “It is the usual trick of intellectually dishonest people to compare or dress up figures.”
Rajnath Singh blamed the UPA of failing to control price rise, corruption and the decline in growth in infrastructure, industrial output and manufacturing. “I just heard a bit of the prime minister’s speech today. I didn’t find the confidence, the conviction that one should have---that we will improve the country’s economy---in the prime minister’s speech. Not just today, but ever since he became prime minister, I have been seeing this,” the BJP president said.