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Economy will return to high growth: FM P Chidambaram
GREATER NOIDA | NEW DELHI; India will return to a high growth path within three years "step by step", backed by global recovery and measures undertaken by the government to push investments, said finance minister P Chidambaram, promising a "strong financial foundation" to support growth and "unflinching commitment" to fiscal prudence.
His commitment to growth capped a day on which the World Bank said India's economy will accelerate to 6.2% in 2014-15 and wholesale inflation dropped to a five-month low.
The finance ministry also deferred a 15,000-crore bond auction citing a comfortable cash situation, indicating that the fiscal situation may have begun improving since December."We are acutely aware that growth can be secured only on a strong financial foundation.On more than one occasion I have reiterated our unflinching commitment to contain the fiscal deficit to 4.8% of GDP in the current year, and I do so again today," Chidambaram said in his valedictory address at the Petrotech conference on Wednesday.
Chidambaram, who had unveiled a new fiscal consolidation plan to get the country's fiscal health back on track, has already launched an exercise to compress government spending and to ensure that revenues remain robust.
His stringent fiscal plan, announced soon after moving to North Block in 2012, helped the country avert a rating downgrade crisis. The fiscal deficit came in at 4.9% of GDP in FY13, lower than the budgeted 5.2%.
The minister said the government will reduce the fiscal deficit by 0.6 percentage point every year to 3%of GDP in 2016-17. Chidambaram said the government's attempts to contain the current account deficit (CAD) has been successful. "I am glad to be able to say that the CAD in the current year will be approximately $50 billion," said Chidambaram, who had pegged CAD at $70 billion in November 2013 when he unveiled his plan to improve India's external balance. Chidambaram said demand for oil and gas will rise as the international economy gradually recovers from the crisis that began in 2008 and that India should focus on energy conservation.
He pointed out that of the total imports of $491 billion, the oil import bill alone amounted to $164 billion, making a case for India to invest more in the sector. "Energy is a key resource and the hydrocarbon sector has become the focus of all policy planners in every large country," he said, adding that the country needed to discover and exploit its own energy resources. "We offer ourselves as both a huge market for energy products and as an investment and technology partner in the oil and gas sector," he said.
Petroleum minister Veerappa Moily said the government would take policy decisions to ensure the energy security of the country. "We are constantly reassessing and reviewing our policy models and also bringing in the necessary reforms to facilitate and incentivise the oil and gas sector and allow them to be more competitive at a global level," he said.
He said that the next auction of oil and gas blocks would be more investor friendly. "The reforms should also position India as a viable destination for foreign investors," he said
