The Prime Minister's message comes at a critical juncture when India's economic expansion hit an over six-year low of 4.5% in the September quarter.
Prime Minister Narendra Modi on Friday exuded confidence that the economy has the resilience to bounce back swiftly from the current slowdown and called upon risk-averse companies to take bold investment decisions and help reverse faltering growth.
To assuage fears of India Inc, Modi highlighted his government’s decisions to decriminalise various offences under the Companies Act and also move towards a “faceless tax administration” to curb harassment and corruption. He also reiterated the commitment that penal action won’t be taken against “genuine corporate decisions”, ostensibly to speed up policy-making in the public sector, especially at state-run banks.
Speaking at an Assocham event, Modi said: “I am fully aware of the discussions happening around (current economic slowdown). I don’t challenge comments made on it. I try to take away positives from such discourse,” he said.
“These kinds of ups and downs (in growth) have been seen in the past but the country has the potential to come out of these circumstances.”
The Prime Minister’s message comes at a critical juncture when India’s economic expansion hit an over six-year low of 4.5% in the September quarter, as consumption, a key driver of growth in recent years, remained muted and investments petered out. Growth in gross fixed capital formation plunged to just 1% y-o-y in the July-September period, against 4% in the previous quarter, albeit on an unfavourable base.
Speaking at the same event, finance minister Nirmala Sitharaman asked India Inc to shun the “self doubt” mood, unleash the animal spirits and have faith in the inherent strength of the economy. She insisted that macro fundamentals remain strong – inflation has been under control, FDI inflow has been strong, foreign exchange reserves are at a record high and PSU banks have been professionalised.
“I would appeal to you that please get out of the mood of self doubt. Can we do it? Can India do it… why is this negative mood? Get out of this self doubt,” Sitharaman said. “Believe in India. You have done that for last 100 years. There is a need for all of you to do it even more now. You have to be the change agent and don’t ask animal spirits to be brought to you. You have it inside, get it out,” she said.
In a bid to blunt the Opposition’s criticism about the state of economy, the Prime Minister told the gathering that there were times during the UPA era when the GDP growth (in one quarter) was 3.5% and retail inflation was as high as 9.4%. Similarly, there were occasions then when core inflation hit 7.3% and wholesale price inflation touched 5.2% and fiscal deficit was at 5.6% of GDP. “I don’t say why some people were silent when GDP growth rate slipped quarter after quarter (in the UPA era),” he said.
Companies that face failures have been extended an easier exit route through the insolvency and bankruptcy code (IBC). The time taken to register companies has been cut to few hours from months earlier and turnaround time at airports and ports has been reduced substantially on the back of better infrastructure. Changes have been made to the goods and services tax (GST) on the recommendations of trade and industry. “We are not afraid of any challenges,” Modi said. Thanks to several steps, India drew record foreign direct investment in the last five years. The country is also home to the third-largest start-up ecosystem in the world.