Growth story intact, says Finance Minister
Finance Minister P Chidambaram on Friday said the global economic downturn was unlikely to have any impact on India's growth story and exuded confidence that the economy would grow by 8.5 per cent to 9 per cent in the current fiscal year.
"We must aim at 9 per cent GDP growth and worry about anything that is hampering 9 per cent growth," Chidambaram told delegates at the Hindustan Times Leadership Summit here.
Earlier in the day, Prime Minister Manmohan Singh said at the summit that India was not insulated from the global economic environment. "There is no doubt that, in the medium term, what happens to the rest of the world does affect India. But these are acceptable risks and there is no great danger of the economy getting derailed. The pace of reforms can be faster, but there are certain limitations and constraints," Singh said.
The International Monetary Fund (IMF) has projected that world output will grow by 4.8 per cent in 2008, down from 5.2 per cent in 2007.
“I would not be disappointed by 4.8 per cent growth in global output. This rate of growth, coupled with good delivery systems and governance, will enable us to maintain high growth rates,” Chidambaram said.
The finance minister, however, expressed concern on the continuous strengthening of the rupee, which was affecting export competitiveness. "The rupee is not in a comfort zone at the moment and ways must be found to maintain a competitive exchange rate. We are constantly monitoring the situation," Chidambaram said.
The rupee has reached a nine-year peak in recent weeks and has been hovering around Rs 39.30 to a dollar as foreign funds continue to pour large amounts of portfolio investments into Indian markets. "We have already announced two sets of measures in recent days," the finance minister said and indicated that more policy measures to help beleaguered exporters might be in the offing.
The $160 billion export target for 2007-08 is increasingly appearing unlikely as exports grapple to compete in the world market.
There has been speculation that the government might impose stricter monitoring of the end use of external commercial borrowings and possibly lower non-resident deposit rates.
Chidambaram also favoured fewer multi-product special economic zones (SEZs) and feared that the mushrooming of such zones across the country could lead to significant revenue leakage.
“I was against the proliferation of SEZs. I would rather have six or seven very large multi-product SEZs similar to those in China. The SEZ policy has taken a slightly different turn,” the finance minister said at the Hindustan Times Leadership Summit here on Friday.
The SEZ policy has been at the centre of controversy facing opposition from various quarters, including farmers whose land is being acquired to establish these manufacturing areas.
“The finance ministry’s view was that this could create a huge hole system which might be difficult to administer,” Chidambaram said.