Prime Minister Manmohan Singh on Friday underscored the UPA government’s commitment to fiscal discipline stating that policy to cut down subsidies and periodic fuel price changes was irreversible.
He signalled an ambitious fightback to revive the economy, hit by a sharply sliding rupee and uncertain external conditions.
He told an industry body that the UPA government would push the envelope on speedier execution of key projects, which, besides upgrading India's creaky infrastructure, can also potentially catalyse growth in every sector from farm-to-factory.
He also urged industry captains to shrug of “negative sentiments.” The government, he said, “will leave no stone unturned” to get the economy going.
“Our policy of adjusting prices to progressively eliminate under-recoveries remains in place,” Singh told the annual session of industry chamber Assocham.
“Infrastructure is absolutely critical for our medium term growth prospects,” he added.
Earlier this week, the government, desperate to spur investment and stem the rupee's slide relaxed the investment caps for foreign investors in a range of sectors including telecom, high-tech defence production and insurance.
Singh said more such measures could be coming soon.
“More FDI reforms was on the anvil,” he said.
The Prime Minister, however, said clocking 6.5% annual economic growth in 2013-14, as forecast earlier, looks unachievable.
“It looks as if it will be lower than that (6.5%),” Singh said.
India's economy is struggling to claw out of a decade-low growth of 5% in 2012-13 with the rupee plunging to record lows.
Foreign funds are pulling out from emerging economies such as India after the US Federal Reserve has signalled to withdraw its easy monetary policy amid signs of resurgence in the US economy.
"The most immediate cause of worry is the recent volatility in foreign exchange markets," Singh said.
India’s current account deficit (CAD), the difference between dollar inflows and outflows, has hit a record 4.7% of GDP in 2012-13 triggering a flurry of steps including higher taxes on gold imports.
The aim should be to bring down the CAD to 2.5%of the GDP, Singh said.
“It is clearly not possible to do this in one year, but I expect that the CAD in 2013-14 will be much lower,” he said.
The government is banking on a adequate summer rains to help reverse the economy crippled by widespread industrial deceleration.
“I am hopeful that the current year, with the rains being plentiful thus far, agriculture will do well. This will help revive demand in rural areas which will contribute to stronger industrial performance in due course,” he said.
The rains are crucial for the summer-sown Kharif crop. A bumper harvest, besides tempering down prices, also spurs consumer products’ buying.