What are your first thoughts on the Budget?
Given the challenges facing our economy, the Finance Minister has done a commendable job. India needs to create jobs for our growing labour force to the extent of 10 million persons every year. To do that, we need to accelerate the tempo of our growth. We need, as the 12th Five Year Plan has mentioned, growth rate of around 8%. This is a growth rate which is consistent with our underlying potential. We have to get there. Although this is a difficult journey – it cannot be achieved in a single year – but the Finance Minister has taken important steps to reverse the pessimistic view with regard to investment climate, with regard to the growth potential and possibilities of our economy.
What reforms are you looking at in the next six months?
The FM has laid out a roadmap. There is plenty of food for every ministry to chew upon. Each one of our ministries has to ask itself this question, if India needs an 8% growth rate, growth which is at the same time inclusive and sustainable, what is it that each ministry should do? The Finance Minister has, I think, mentioned these challenges. It is up to the collective wisdom of my Council of Ministers to convert these challenges into opportunities to accelerate the tempo of growth, to make it more inclusive, to make it more sustainable.
Will your government will get the adequate in Parliament, There is a perceptible change in the attitude of the Opposition. But is the bureaucracy on board? Are projects being cleared?
There have been problems with regards to clearances, with regards to environmental, with regards to forest clearances, land acquisition problems. Many of these areas are the responsibility of the state government. Whatever is within the realm of possibilities of the central government’s action points, we have committed ourselves. We will use the mechanism of the Cabinet Committee on Investment to grapple with these tensions which exist within our system and to ensure that roadblocks whether they are environmental clearances roadblocks or forest clearances roadblocks, they are dealt with so that these roadblocks can be cleared and removed.
You are confident that a positive climate is there for clearances to happen, for bureaucracy to be on-board and the Finance Minister himself has said in Parliament that some of the big projects which are pending specially in the energy sector will be cleared…
Yes, I think he is speaking on behalf of the Cabinet and I am pretty certain that the mood of the country is : this country must not lose any time. It must get its act together to accelerate the tempo of economic growth, sustainable growth, equitable growth. And I do believe if the general mood of the country is right, it will infect the bureaucracy, it will infect the Opposition. And in this task, there are no winners or losers. If India succeeds to sticking to a growth path of eight% or more, the winners will be the people of India, winners will be our young men and women who need desperately productive job opportunities.
How much are you worried about some of the structural distortion that have crept into the economy - the current account deficit, the dependence on foreign portfolio investors particularly to fill the gap and the heightening of inflation?
They are today, three types of barriers that can affect the realization of the growth potential. One is the fiscal deficit. The Finance Minister has charted a path to bring back the fiscal deficit under control and if we succeeded we would have created a better climate for investment, we would have created a better climate also for more moderate levels of inflation than we have had in the last two years. The second problem is that inflation has gone out of hand…therefore if fiscal deficit is brought under control it would also enable us to moderate the pace of inflation.
The third is the current account deficit. We cannot reduce the current account deficit in one go. As the Finance Minister mentioned we have a current account deficit of about $75 billion. In the short-run it has to be financed. In the medium-term, it has to be reduced. We have to reduce our dependence on imports of oil, of coal, of gold, of petroleum products. And this is medium-term objective and it can be achieved partly by reducing unwanted imports and partly by boosting the country’s exports efforts. So a multi-pronged strategy has to be put in place to achieve credible answers to all these three problems - that is, tackling the fiscal deficit, tackling the inflation problem, tackling the current account deficit.
What do you think is a safe current account deficit (CAD)?
In my view CAD at 2.5-3% of GDP would be a safe level of CAD.
What do you see as the GDP growth in 2013-14?
As the FM has mentioned and yesterday’s Economic Survey also hints that it is realistic to assume a growth rate of 6.2-6.7%, and that in three years time if we work hard and if the world economy also improves we should be able to get back to eight% growth rate in two to three years time.