FM pegs 2011-12 growth at 8.6 per cent, expects inflation to fall to 6-7 per cent by end of the financial year.
As the UPA government drew flak over "policy paralysis", Finance Minister Pranab Mukherjee took on those spreading cynicism and overlooking the efforts made by the ruling coalition to address the issues faced by the economy and the society. He said the government is carrying forward economic reforms, addressing the menace like black money, creating conducive environment for investment and engaging with civil society members on their concerns. Interacting with economic journalists, the Finance Minister said a review of nine per cent growth projections made in the Economic Survey for this fiscal could only be made after the first quarter GDP figures are out by August 31, but the background note given by his ministry pegs the growth at 8.6 per cent, slightly higher than 8.5 per cent achieved during 2010-11. He said though food inflation is high, it was substantially down at over 8 per cent in June this year from over 20 per cent in February, 2010. By this fiscal end, he believed overall inflation will decline in the range of 6 to 7 per cent from 9.44 per cent in June. The senior member of the UPA Cabinet interacted with journalists on a wide array of subjects, after Prime Minister Manmohan Singh met senior journalists last month to wipe out the impression that he is “ in hiding”. Mukherjee's observations on various issues:
On Charges of Policy Paralysis: Somehow, I have a feeling that there is a sort of cynicism that we are getting. You are talking of perception of the policy paralysis. One shall have to keep in mind we are not living in an isolated world. Therefore, when you look at the recovery process of America,there is renewed weakness as reflected in their retail sales and housing and labour markets. Similarly, Chinese manufacturing industry expanded at the slowest pace in four months in June. The purchasing managers index dropped to 57 from 61.9 (in China). You are all fully aware of slowdown in Europe. Only France and Germany (are rapidly growing), recovery of others are not strong enough. In that context, one should look at our performance.
I would say that it is taking long to take a call on entry of more players in the banking space. But, I will not call it a policy paralysis. RBI will issue final guidelines, and then licenses would be issued.
Black Money and Supreme Court’s Decision to Set Up Special Investigation Team on the Issue:
I cannot make comments on the judgment of a court. Only court can make comments. So, we have filed an interim application…There is no denial for the fact that there has been problem that it is equally true... About 87 countries, we have initiated negotiations on double taxation avoidance agreement (DTAA) and tax information exchange agreements. With 57 countries, negotiations have been completed, they are in progress in 29 countries or so. Cynicism is that we are not getting information on black money. We have signed agreement with Switzerland in 2010. Switzerland will have have to get clearance from both houses. So, they (Switzerland) said September-October this year, the entire process will be completed.
Economic Growth: It (Review of growth pegged at 9 per cent in the Economic Survey for this fiscal) will always happen during the middle of the year. There is uncertainty in the global economy. There is instability in the global economic recovery process. Therefore, we cannot be insulated from the adverse impact of that uncertainty to certain extent. But you don't gain anything by saying that three would be no growth, there would be slow down in the growth without being backed by a trend in at least first quarter. We shall have to analyse these things on the basis of hard facts. It would be possible to do after obtaining first quarter of the figures, and looking at the trend. Exports are growing high, despite uncertainty in Europe. Diversification of exports has taken place.(Background note says that huge demand from developed world may not sustain due to Euro area and slowdown in global trade volumes and effects of commodity prices).
Inflation: There is no doubt that high inflation is continuing. Inflation has been doggedly high. But it is equally true that food inflation has come down from 22 per cent to over 8 per cent, which is also not acceptable. Therefore whenever I comment, I say that we should take it in a little larger canvass. My assessment is that at the end of the year, by March, overall inflation should be anywhere between 6-7 per cent, but in between there would be some fluctuations. By end of the monsoon, moderation will begin.
Reforms: There is an impression that I have given up… But, we have made a series of major enactments… MMRD (The Mines and Minerals (Development and Regulation) Act. The Food Security Bill, which we have given more or less a final shape. In the last budget session, we had the banking amendment bill, insurance amendment bill, all these are in different stages of consideration. Legislations have their own time. Basic fact is that the ruling party does not have a clear absolute majority. In running a coalition government, partners will have to agree with the proposals or the reforms agenda. If they do not agree, if they are not made agreeable, legislative support will not be available. It is as simple as that. The ground reality is also to be admitted when we sit in the government we take one position, when we sit in the opposition we take different position. This sometimes causes problems. PFRDA was conceived during the NDA government. On GST, BJP manifesto had even indicated the rate--12 per cent.
Disinvestment And Fiscal Deficit: I am confident that I will be able to get this Rs 40,000 crore. However, I do not roll out a list of the companies, because I do not want to create a situation where the market will be flat. I will also like to have some expectations from the market, so that we can have best market condition to mop up the additional resources. Reining in fiscal deficit (4.6 per cent) is difficult, but the target will be met.
FDI in Multi-Brand Retail and National Manufacturing Policy: Manufacturing policy is being drafted by the (Commerce) Ministry. And we are in touch with them. I think it will be done shortly. So far as FDI in retail is concerned, talks are going on, but it is not possible for me to give any indication.
Extension to RBI Governor D Subbarao: We have not decided yet. He (Subbarao) is a good man.
Land Acquisition Bill: So far as this bill is concerned, this is in the final stage. Perhaps it may be introduced in this (monsoon) session.
Lokpal Bill: Many things have been done, but it is equally true that we have more or less finalised the draft in the all party meeting. The endorsement there was that let the government draft the Bill and that it will be introduced. At no stage we have compromised.
Non-state Actors Taking Active Role Because of Governance Deficit: There are a couple of issues. One has to keep in mind that everyone has to play his assigned role. If we fail to do that, then some distortions start coming. Now, what is expected that legislators will legislate, they will debate, they will argue on policies. That is the normal expectations. That is the assigned tasks. But if we find that day after day, legislators instead of doing their normal functioning, are obstructing or disrupting, then questions come to the mind of the common people.
GST: …Anyway it is their (Empowered Committee of state finance ministers) job, because it is their association. My role is to provide a helping hand. So, they are to decide. (Bihar Finance Minister) Sushil Modi has been chosen (the committee's chairman)…I hope his leadership will take the steps forward. And certain hurdles we are able to overcome… So, there is a possibility, but timeframe is difficult to say. Trying to synchronize with DTC (Direct Taxes Code, that is slated to be implemented from April one, 2012), but that may be difficult
