India needs a lot more reforms, not less: FM

Written by fe Bureau | New Delhi | Updated: Aug 28 2013, 10:42am hrs
PCFinance minister P Chidambaram addressing a press conference in New Delhi on Tuesday
On a day when the rupee continued its downhill journey and closed at an all-time low of 66.24 against the dollar, the finance minister P Chidambaram said the solution was not less reforms but more reforms and less restrictions and averred that all options including a sovereign bond issuance were on the table.

Replying to a debate on the state of the economy in the Lok Sabha on Tuesday, Chidambaram outlined 10 specific steps to invigorate the economy including a strong push to the PSUs capital expenditure plans, an expeditious resolution to the stagnation in coal production and ending the impasse in the iron ore sector.

In what could boost global investors confidence in India, in the medium-term expenditure framework (MTEF) tabled in Parliament on Tuesday, the government projected to retard the growth in revenue expenditure by achieving a huge savings on the oil subsidy front. As per the MTEF, helped by the progressive decontrol of diesel prices and the cap on subsidised LPG cylinders per household, the oil subsidy is projected to be reduced drastically from an estimated R65,000 crore this fiscal to R35,000 crore in FY15 and further to R20,000 crore in FY16. While the weak rupee could adversely impact this plan, oil minister Veerappa Moily said that the government was planning to save $25 billion this year on oil imports through some measures including increased imports from Iran where payments are made in rupees. Despite the food security law, subsidy on this front is estimated to increase less steeply than expected to R1.2 lakh crore in FY15 and R1.35 lakh crore in FY16.

Thanks mainly to an expenditure compression, the fiscal deficit for 2012-13 was contained at 4.9% of GDP. According to a medium-term road map, the deficit is projected to be reduced to 4.8% in 2013-14, 4.2% in 2014-15 and 3.6% in 2015-16.

On the mining sector, Chidambaram said, If there are irregularities in allocation, we can initiate a probe. But that should not stop fresh allocations. We have to find a way that will also be respectful of the Supreme Courts observations.

Chidambaram said, What is needed now is not less reforms, but more reforms...not more restrictions but less restrictions, and not a closed economy but a more open economy. He hinted at further liberalising foreign investment (including FDI norms in pension and insurance). We have to add to FDI, NRI investments, external commercial borrowings and bank deposits, he said, adding that every effort should be made to raise the GDP growth back to over 8% soon. We will go through some pain... By the end of the day, I am sure we will be able to emerge stronger, he said.

Chidambaram said currencies of other emerging economies including Brazil and South Africa and even Malaysia which has a current account surplus have been affected and, therefore, India is working with such countries to see what can be done together to counter the situation of foreign currency outflows even as the US could soon start winding down its stimulus.

Reiterating that it was important to unblock stalled projects and revive the investment cycle, the minister said the Cabinet Committee on Investments has so far cleared 173 projects entailing investments of Rs 1.93 lakh crore. He said PSUs with surplus cash have been told to invest, adding that the performance rating of the chiefs of such PSUs will depend on their capex programme.

The finance minister said that though all public sector banks are well-capitalised, they will get an additional Rs 14,000 crore from the government soon. He said the proceeds of disinvestment including from Coal India of PSUs will go into recapitalisation of PSBs.

The minister said every effort is being made to reap the full benefits of the good monsoon. In this regard, he said gas allocation to all fertiliser plants are being done on a priority basis to ensure enough fertiliser for farmers. Banks have also been told to give credit worth over Rs 7 lakh crore to farmers this year.