Finance Minister Arun Jaitley today said most of the challenges faced by the Indian economy have been created by external factors, even as he expressed confidence in the country’s strong fundamentals to withstand such transient global trends.
“I have no doubt that our ability to withstand the transient global trend, created predominately by external factors is very strong,” he said here.
He emphasised that macroeconomic indicators like inflation, forex reserve, capital investment in infrastructure and revenue collection are all positive.
Referring to the global turmoil, he said world is passing through some very challenging trends and prospect of the US Fed rate hike is creating uncertainty.
“US is a big economy, anything that happens there has big impact across the globe,” he said adding “China is another major global economy, and if their manufacturing data throws up adverse indication, because a global slowdown is going to impact them, that itself has an impact and shakes the entire (scenario). But these are only transient trend.”
If an economy exists on its own solid foundation and its own fundamentals are strong, then it is not a very challenging task’ to withstand these transient trends, he added.
“Our approach in India today is that our own fundamentals today become stronger and stronger so that our ability in globally integrated economy to withstand these transient trends increase… (and) we acquire certain kind of immunity that beyond a few days we are able to withstand those trends,” he said.
Referring to the challenges faced by steel sector, the Finance Minister said, this sector is also impacted by the external factors.
Stress in the steel sector, Jaitley said, has resulted in the creation of non-performing assets for banks, and banks ability to lend to other sectors are compromised.
Steel sector is the largest contributor to the NPAs of the banks, he added.
Gross NPAs of the public sector banks rose to Rs 2.67 lakh crore at the end of March quarter.
Assuring support to the sector, the finance minister said there is a need to address the root cause.
“The root cause is that you have to take into account various factors and make our own domestic industry competitive, and when you become competitive, the external factors ability to adversely affect you is also reduced,” he said.
Referring to capacity building, he said “sooner or later our mining capacity (has to be)… expanded so that the availability of excessive raw material itself will ensure that market forces bring down the raw material prices.”
There is no other way of reducing raw material prices than making resources available to the people to the extent that they need it and market forces are capable of ensuring the reduction of that prices, he added.
The minister asked steel industry to develop its own strength to become globally competitive.
“You have to enable yourself for cost competitiveness… hand-holding can take place up to a point. Beyond that point one has to stand up and run the industry on own strength,” he said.
The government has to create that enabling and friendly environment in which there is no adversity, he said.