Finance minister Arun Jaitley on Sunday signalled the new government’s commitment to fiscal discipline and identified containing inflation, creating jobs and reviving growth as the topmost priorities.
Prime Minister Narendra Modi with Governor of Reserve Bank, Raghuram Rajan at 7, Race Course Road in New Delhi. (PTI Photo)
He hinted at ushering in a much-needed round of reforms to turn around the economy, which has grown at below 5% for two successive years.
“This has serious social consequences since slowdown comes with a decade of jobless growth. Reviving the growth momentum, containing inflation and altering the pattern of growth to gainful employment is today an overriding priority. There is a need to boost domestic low-cost manufacturing and hasten the pace of reforms,” Jaitley said in a post titled “From Celebration to Challenge” on his Facebook page, summing up his one week in office.
All eyes are on Jaitley’s first budget—likely to be presented in the first week of July—with the daunting challenge to cool prices, keep the budget books balanced and push growth with the added hurdle of a possibly deficient monsoon.
“Price stability and growth are inter-twined but may require a different strategy,” Jaitley said.
His remarks came two days before the Reserve Bank of India presents its bi-monthly monetary policy review on Tuesday.
RBI governor Raghuram Rajan, who met Prime Minister Narendra Modi on Sunday, is widely expected to keep interest rates unchanged with inflation showing signs of rising again.
Retail inflation jumped to 8.6% in April from 8.3% in March. Food inflation rose to 9.8%. Things could get worse if monsoon rains are scant due to a possible El Nino effect—a Pacific Ocean weather glitch causes droughts in the sub-continent.
The government needs to spin millions of jobs to fulfill its poll pledge of “Achhe din aane wale hain’ (good days are ahead)”, while elbow room in the treasury is tight in the backdrop of high inflation and borrowing rates.
“There was hope in the BJP/NDA led by Shri Narendra Modi,” Jaitley said.
“It is this hope which commands us to pull the country out of the present economic situation. This will involve fiscal rectitude as combination of monetary and fiscal policy,” Jaitley said underlining the government’s commitment to walk the talk on keeping the budgetary deficit under check.
India’s fiscal deficit—the amount of money the government borrows to fund its expenses—stood at 4.5% of GDP in 2013-14. The previous finance minister P Chidambaram pegged fiscal deficit for 2014-15 at 4.1% in the Interim Budget presented in February.
“We must move towards an era of fiscal discipline where we can reduce the fiscal deficit, contain inflation and improve upon our growth rates.
India must prepare itself for this. We must commit ourselves to this discipline so that in order to strengthen the Indian economy which can improve the quality of life of every Indian and pull out the deprived ones from the state of poverty. Short term disciplining till we reverse the present trend will give us long term benefits,” Jaitley said.