Hitting back at the Opposition for focusing only on “one bad year”, Prime Minister Manmohan Singh on Friday assured industry that the government will leave no stone unturned to ensure that the Indian economy rebounds.
“Our political critics focus on the experience of one bad year. This makes for good television but it is a very distorted picture,” Dr Singh said in his address to the 92nd AGM of industry chamber Assocham.
The PM noted that economic growth during the Congress-led UPA government was faster than under previous governments. “The average growth rate in the eight years of the UPA, from 2004-05 to 2012-13, was 8.2 per cent per annum. This is much better than the 5.7 per cent reached in the previous eight years,” said Dr Singh. He said poverty declined at a faster rate during UPA rule and rural wages rose much faster.
“The percentage of population below the poverty line declined at 0.75 percentage points per year before our government came to office in 2004-05. It has fallen more than two percentage points per year between 2004-05 and 2011-12,” said Dr Singh. He said this is a record that any government can be proud of.
Dr Singh asked industry “not to be overcome by negative sentiments”. “I assure you we will get out of it (economic slowdown),” said the PM. Dr Singh noted that growth in the current fiscal is likely to be lower than the 6.5 per cent aimed at in the Union Budget. “I must emphasise that it is not the exact growth number for 2013-14 that matters. What is important is that the economy should turn around from the five per cent achieved last year,” said Dr Singh, adding this is likely to be achieved with a good agricultural performance and the effects of the various actions the government is taking on infrastructure.
Dr Singh said he knows business is concerned about the slowdown and is looking at the government to bring the economy back to a higher growth path. He noted that while the currencies of many emerging countries fell against the dollar, the rupee’s depreciation was exacerbated by the fact that “our current account deficit had increased to 4.7 per cent of GDP in 2012-13.”
However, he said the fall in rupee’s value will help industry compete better with other countries by making exports cheaper and imports costlier. The PM said there is a need to push exports. “The depreciation in the rupee will help. Of course, there is a time lag before this benefit will be felt in terms of export volumes, but orders being booked from now on would certainly benefit,” said Dr Singh. He said the government is also trying to remove constraints in the export of iron and other ores, which saw a considerable decline in the last one year.
Dr Singh said the government had taken measures to control the demand for gold and they have had some effect. “Gold imports declined sharply in June, and I hope they will stay at normal levels from now on,” said Dr Singh. He said the recent RBI steps are to stabilise the rupee and not meant to signal an increase in long-term interest rates.
He said that ideally the government should bring the CAD down to 2.5 per cent of GDP. “It is clearly not possible to do this in one year, but I expect that the CAD in 2013-14 will be much lower than the 4.7 per cent level recorded last year. It will decline further next year,” said the PM.
Dr Singh said a major concern in the past few months has been that many projects have been held up for various reasons. There has been an expansion of power plants but coal supply became a problem. “We have now resolved this problem and the fuel supply agreements are being signed which will ensure that all plants that are commissioned by 2015 will have adequate supplies of coal, consisting of a mix of domestic and imported coal,” said Dr Singh.
He also noted that many projects have also been held up for lack of regulatory approvals. “These are being expedited. A separate cell has been set up in the Cabinet Secretariat recently to identify big-ticket projects, both in the public and private sectors, and to see how they can be helped through various hurdles,” said Dr Singh. He said the government is monitoring the progress on infrastructure on a quarterly basis.
Dr Singh expressed the hope that industry was thinking seriously of how to become more competitive. “It is because we are confident that it can that we have entered into the Comprehensive Economic Partnership Agreement with the Asean countries as well as the Republic of Korea. We are hoping to conclude a similar agreement with the European Union soon,” added Dr Singh.