Our growth has slowed down to 5%, which is clearly disappointing. But this is not a permanent reduction in our longer-term growth potential. We grew at an average of about 8% in the last 10 years and we can get there again. We are seeing, I believe, a temporary downturn, which does happen, Singh said at the CII national conference and annual general meeting (AGM).
Singh had last addressed the CII AGM seven years ago in 2007- just before the global economic crisis when India was growing over 9%. In fact, the PM's recent moves to address the AGMs of the industry chambers seems to indicate that the government wants to signal that it is not anti-business. Singh had addressed the AGM of Ficci also in December 2012 after a gap of five years.
Emphasising that growth is driven by the private sector, he said: Government is not the prime mover of growth. But the private sector needs an environment in which enterprise can flourish and create both jobs and stimulate growth. It needs an environment, which will ensure that this growth is inclusive. The environment today is not what it should be, and that is what the government must correct.
This assumes significance as the growth rate of the economy is strongly correlated with investment rate. The private sector is the major source of investment in India with 75% of investment being in it. But both public and private investment declined in 2011-12 as a share of GDP. This decline in investment must be reversed, according to Singh.
Urging Indian industry to have faith in the government's determination and avoid getting swamped by a mood of negativism, Singh said: One of the advantages of being a democracy is that our shortcomings and our deficiencies are always put before the public. And there are indeed many deficiencies. Corruption is a problem. Bureaucratic inertia is a problem.
Highlighting that the country has to cope with weak exports and higher current account deficit (CAD), which is due to global factors, he said that the CAD will be around 5% of GDP in 2012-13.
The CAD, which is the difference between the outflow and inflow of foreign currency, had touched a record high of 6.7% in the December quarter mainly on account of higher gold and oil imports and a slowdown in exports.
In the meantime, we have to accept that our exports will be weak and our current account deficit in the balance of payments, higher than it should be, the PM noted.
However, the country can learn to cope with these problems. The domestic problems can be solved by restoring macro-economic balance. Besides, it is necessary to ensure that the financial savings in the system are available to support investment in the economy instead of being absorbed by government deficits.
Over the past several years, our fiscal deficit expanded to a level, which is simply unacceptable. This is partly because of a conscious policy of fiscal stimulation, which was followed by many countries. It is also necessary to bring inflationary pressure under control. Inflation has been a problem and though it is softening, it needs to be brought down further, Singh added.
'Efforts on to resolve fuel issues in a time-bound manner'
Amid severe coal and gas shortages faced by the power sector, leading to lower electricity generation in the country, Singh said efforts are on to resolve fuel supply issues in a time-bound manner and hoped to see results in the next three weeks.
The problem of fuel supply -both coal and gas-to power projects has been posing problems. The Ministries are working to reach a resolution of these problems in a time-bound manner. I hope we will see results in the next three weeks, he said.
'Cabinet Committee on Investment has made a difference'
Designed to fast-track regulatory clearances for industry and infrastructure and to resolve inter ministerial differences, the Cabinet Committee on Investment (CCI) has given clearances for five oil blocks.
We hope to resolves issues relating to another 31 blocks within the next two weeks, Singh said.
In the power sector, issues relating to the Rs 14,000 crore project in Jharkhand`s North Karanpura area have now been resolved. This 2,000 MW project has been pending for 13 years.
The CCI has also streamlined the processes of granting environment and forest clearances for mega projects. Clearances for 12 coal mining projects have been fast tracked. These projects would add 37 million tonne to our annual coal production, Singh added
'Other reform measures being contemplated'
While the Financial Sector Legislative Reforms Committee has made a number of recommendations, the Land Acquisition and Rehabilitation and Resettlement Bill has been cleared by the Cabinet and will soon go to Parliament.