He need not walk alone any longer. Three months ago, a visibly upset Finance Minister P Chidambaram had said, “Growth is as much a challenge as inflation. If the government has to walk alone to face the challenge of growth, then we will walk alone,” after the Reserve Bank of India refrained from cutting policy rates in the second quarter monetary policy review.
But, that did not stop him from sticking his neck out on rates again, this time in front of a global audience. “RBI seems to be getting traction with tight monetary policy and core WPI inflation is now below five per cent. This would give the RBI room to cut policy rates.” These words are part of a presentation prepared by the department of economic affairs for the finance minister’s global road show. As if on cue, the central bank cut the repo rate by 25 basis points on Tuesday.
The minister’s entourage started the roadshow last week at Hong Kong and has since travelled to Singapore and Germany and London.
| SALES PITCH | |||
| Key parameters | 2005-06 | 2011-12 | Chge (%) |
| Real GDP (Rs ‘00 crore) | 32,542 | 52,220 | 60 |
| Real Per Capita GDP (Rs) | 33,548 | 46,221 | 38 |
| Investment/GDP (%) | 35.8 | 37.6 | 5 |
| Exports ($ bn) | 103 | 303 | 194 |
| General Govt. Gross Debt (% GDP) | 77.4 | 64.9 | -16 |
| Workers Remittances ($ bn) | 28.0 | 63.7 | 127 |
| Gross International Reserves ($ bn) | 151 | 294 | 94 |
| FDI inflow ($ bn) | 9.1 | 46.8 | 414 |
| FDI outflow ($ bn) | 6.1 | 25.8 | 323 |
| Source: India for Investment, fact book by department of economic affairs, January 2013 | |||
Interest rate outlook is just one element of the presentation in the form of a fact book titled India for Investment, dated January 2013, that Chidambaram is using to sell India to foreigners. From detailed and updated data on key macro-economic paramaters to comparative price-earnings of the Indian stock market against its Asian emerging market peers, from oft-repeated high growth—demographic advantage—Infrastructure pitch to recent policy initiatives, the fact book offers a glimpse of everything a foreign investor, rather any investor, would need to know about the country’s economy and capital markets.
Quoting from foreign bank reports, IMF and other international studies and often using their tables and graphics the document seeks to present how India has shown improvement in several key parameters over the past five years and is better off than comparables on others.
“Backed by realistic facilitating plans for fiscal consolidation and building cushions against exogenous shocks, India’s rapid pace of economic growth is both stable and sustainable. Immense potential, and plans for its realisation, exist for development and growth,” the document said.
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Explaining “Why investors should invest in india”, the ministry highlighted domestic consumption driven growth, a stable financial system and regulatory framework, strong demographic advantage, good growth prospects supported by ongoing economic liberalisation and strong domestic demand, vibrant, transparent and high-yielding capital markets, a strong and competitive private sector, healthy sectoral diversity of the economy, high growth in exports and a highly educated workforce.
Reiterating the commitment to fiscal consolidation and reform ahead of the Budget, the document said, “In October 2012, government prepared a fiscal consolidation road map. As per the road map, the fiscal deficit of the central government will be reduced in a calibrated way from the targeted 5.3 per cent of GDP in FY13 to 3.0 per cent of GDP by FY17.”
Expressing hope that revenue growth should continue to exceed expenditure growth, facilitating fiscal consolidation, the document said, “The favourable fiscal / investment outlook is supported by key structural changes, including reduction in fuel subsidy, targeted cash delivery of subsidies, proposed introduction of Goods & Services Tax, further PSU divestment, liberalised FDI regime for multi-brand retail, insurance, pensions, domestic airlines and broadcasting, amendment in Banking Regulation Act and Companies Act.”