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Finance Minister P Chidambaram sees the Indian economy returning to its potential growth rate of 8 per cent in the financial year 2015-16 and also doing better in the present fiscal.
"We can overcome the period of stress this year and post higher economic growth than last year. Next year, we will grow 6-7 per cent and achieve the 8 per cent growth level in the year after," he said. India achieved a 5 per cent economic growth in FY13. Addressing a function at the State Bank of Mysore (SBM) in Bangalore, he said the country's economy would recover from stress this year. He said, the country has enough capacity to get over this stress level.
"Last year, I was told by pandits, analysts, rating agencies and all the wise people that appear on television every day that we cannot contain fiscal deficit. I am happy that we were able to surprise them," he said.
"We did contain fiscal deficit at a level below what I had indicated. Again at the beginning of this year, we were told that the government cannot contain the current account deficit," he continued.
Chidambaram said he will surprise observers once again by containing the CAD well below the $70 billion expected this year. "I do not have a magic wand. I say this because, we have intellectual capacity and our people, which gives us the confidence that we can overcome the period of stress," he said.
The Finance Minister said India has a team of good economists, economic advisors and administrators and institutional capacity that could tide through the crisis.
"If we could sit and work out the set policies and give them freedom, to implement it. Believe me, sooner than later we will find results," he said. He said the people of India are very good in saving their money, which will come to their rescue in worst of times.
"In the worst of times, our savings did not go below 30 per cent and 36 per cent in 2007-08. I have no doubt, everyone in this country saves and that is what the great fate of this country," he said. Chidambaram said these savings can be channelised into productive investment if a risk-taking climate is taking. "I have no doubt in my mind that we will get over this period of stress," Chidambaram said.
The Finance Minister said the government is waiting for banks to come up with specific plans on infusing more capital into public sector banks than what was announced in the Budget for 2013-14.
"We will work out the banks' requirements depending on how much additional credit they are able to provide to select sectors at lower rates," he added.
"We will work out how much the banks require depending upon how much additional credit they are able to provide to selected sectors at lower rates. Banks will be encouraged to lend more in certain selected sectors at lower rate in order to boost demand. Let each bank come up with what they can do. Once we know, what each bank can do then we can aggregate the demand and calculate what additional capital they require and they will be provided," he added.
