A day after the economy threw up its best growth figures in two-and-a-half years, finance minister Arun Jaitley said better days were ahead amid signs that companies were investing and hiring more and prices were moderating, buoyed by measures taken by the government.
“With the long-term impact of the initiatives we have taken, I am sure, the impact in the coming quarters will be much larger,” Jaitley said at a press conference to mark 100 days of the Narendra Modi government.
Government data showed Friday that the economy expanded at 5.7% in April-June — after two consecutive years of below-5% growth marked by policy logjams, project delays and a string of corruption scandals that sent Asia’s third-largest economy into its deepest slump in 25 years.
Since coming to power in May, the government has eased restrictions on FDI in key sectors and started the process of labour reforms.
Jaitley said inflation, while still a cause for concern, was waning and that there was enough food stock in the country.
India’s wholesale inflation rate grew 5.19% in July, its slowest in five months, but high food prices, particularly potatoes and fruits, remain worrisome. Retail inflation, a gauge of shop-end prices, rose to 7.96% in July from 7.46% in June. Analysts have cautioned that inflation may be stickier than the price data suggests.
Poor rains in parts of the country have pushed up food costs. Wholesale vegetable prices, for instance, have soared 68% since March.Reiterating the NDA’s commitment to walk the talk on fiscal discipline, Jaitley said he was more confident now of keeping fiscal deficit — a measure of how much the government borrows to fund its expenses — at 4.1% of the GDP, a pledge made in his maiden budget in July.
Underlining the government’s bold reformist intent, he said the easing of foreign investment caps in defence and railways and the intent to open up the insurance sector were all signs of the Centre’s vow to turnaround the economy.
The BJP has long held that it inherited an economy in the doldrums, which it blamed on mismanagement by the UPA.
In its first three months, Jaitley said, the government has prioritised people’s welfare through a raft of measures aimed at spinning jobs, multiplying income and helping families deal with ballooning home budgets. The salaried class got tax breaks, the young got a skill development plan to ease their entry into the job market, and for those looking to branch out on their own, concessions were announced for small and large enterprises. As India looks to cities for employment, a plan to build 100 smart cities was set in motion. Infrastructure, one of the biggest hurdles in India’s growth story, has been put on the fast lane. India needs to create some 100 million jobs over the next decade or so if it is to enter the league of developed nations, but risks economic and social disaster if it fails to provide employment to its burgeoning youth population.
Pointing to another area of challenge, Jaitley said the uncertainty on coal block allocations must end soon. The Supreme Court recently said all allocations since 1993 were illegal. “I hope the uncertainty does not continue... We cannot allow the fate of coal blocks to hang mid-air,” he said, adding, “The silver lining in the judgment is that it moves the system to a fairer method of allocation and takes away from the government the power of arbitrary allocation.”
On the goods and services tax (GST), which aims to replace a welter of levies with a single tax, Jaitley said there was broad consensus on the issue.
He also said he would be holding talks with other parties on the new land acquisition law.
Seeking to dismiss the impression that NDA ministers were hamstrung by the PM’s office in decision-making, he said, “This whole debate is not about over-centralisation... I look after different departments and the extent of decentralisation that we enjoy is very large… but certainly, if you have a very active PM, along with this decentralised authority that’s been given to us, there will be an element of accountability.”
Jaitley, who also holds the defence portfolio, called recent cases of ceasefire violations by Pakistan “extremely serious and provocative”.
He said, “We had hoped things would improve after a flag meeting, but these (ceasefire violations) are creating an environment not conducive to the relationship between two countries.”