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Prime Minister Manmohan Singh on Wednesday sought to cheer up India Inc. He advised it not to be unduly pessimistic in bad times or over-enthusiastic in good times.
Speaking at the annual general meeting (AGM) of the Confederation of Indian Industry (CII), the PM said corporates should not be too depressed, just as they shouldn’t have been too optimistic when the economy was growing at nine per cent a year before 2008-09.
Singh’s comments came at a time when India’s economic growth crawled to a decade-low of five per cent and the macro parameters haven’t shown any sign of a quick recovery.
The PM has, however, recognised that the government should help improve the environment for business.
Singh reminded industry that over-enthusiasts used to believe the Indian economy would always grow by nine per cent, irrespective of whatever the government did. “The consensus today is that unless the government acts swiftly, our growth, which has already decelerated, will be perennially stuck at five per cent,” he said amid a roar of laughter from the gathering.
Back at the CII AGM after six years, Singh recalled his contrarian advice to industry in his last address in 2007, just before the global financial crisis — exercise restraint in salaries and conspicuous consumption. Then, amid high economic growth, his advice was branded unnecessarily downbeat, but received global attention in the aftermath of the financial crisis.
Singh conceded that the government had to ensure macroeconomic stability by lowering the Centre’s fiscal deficit, reducing record current account deficit (CAD) and inflation, and speedily clearing of projects to steer the economy to eight per cent growth path.
He also reminded industry that the government was not the prime driver of growth. India is a private sector-led economy with 75 per cent of investment coming from non-government sources. It was the environment that lied in the hands of the government, which can be addressed, he said.
The Prime Minister also sought to prepare the country for low exports and higher CAD till the global economy stabilised. “We have to accept that our exports will be weak and our CAD higher than it should be. We have to learn to cope with these problems.”
Reading out a list of initiatives the government had undertaken, including announcements in the Budget, he said the effects of these steps would be felt over the next few months, hinting at more reforms. “I hope they will go far in improving investor sentiment. We will carry this process forward and do even more in the coming days,” said Singh.
He said affirmative action (reservation for the weaker section of society) must not remain simply a paper exercise, but a living reality. In his earlier address to CII, Singh had asked the chamber to pro-actively adopt an agenda for affirmative action to obviate the need for a legislation for the same.
“We can, in my view, get back to eight per cent growth, even as we try to make the longer-term changes in our system to deal with these problems. An, what is more, we can achieve growth of an inclusive kind,” he said.
Corruption and bureaucratic apathy are real problems, Singh conceded, while quickly adding that coalition is not easy to manage.
In fact, the United Progressive Alliance (UPA) ally Trinamool Congress left the coalition when the government had allowed up to 51 per cent foreign direct investment (FDI) in multi-brand retail in September last year. Today, he promised more action on the FDI front.
However, he said these problems-- corruption, lethargic bureaucracy and managing coalition -- were there even when the economy was on high growth path.
