Despite potential headwinds, including the impact of the erratic monsoon on farm output and coal shortages tempering electricity generation, Finance Minister Arun Jaitley on Saturday predicted faster growth in the coming months. A day after the government released its strongest economic growth numbers in over two years, the finance minister said that rekindling the investment cycle remained the top priority for the government and that the steps taken by it should start yielding result in the coming months.
“With the long-term impact of all the initiatives we have taken, I am sure, the impact in the coming quarters will be much larger,” Jaitley said. Pointing to a surge in manufacturing orders, a revival in the capital goods industry and renewed international investor interest, Jaitley said he expected GDP growth higher than the 5.7 per cent recorded in the quarter ended June 2014.
?In the first quarter, a 5.7 per cent growth rate is encouraging. With the long-term impact of all the new initiatives setting in, I am sure the impact in the coming quarters will be much larger,? Jaitley said at a press conference here.
As opposed when the new government had taken charge, the finance minister said that there has been a sharp change in the attitude of the foreign investors towards India. ?When we came into office, our priority was to contain inflation, restart the growth agenda and keep fiscal deficit at acceptable limit… The economy was facing significant challenges while decision-making had slowed down. We were ceasing to be on the investors agenda while the mood was significantly low. It is in this backdrop that we took over. (However) election result itself was a mood changer,? he said, adding that the government is clear about the direction in which it wants to move.
The government is working on expanding economic activity, hastening decision making, easing the process of doing business in country and opening up investment limits in significant sectors, he said. The government has already liberalised the FDI regime for the defence, railway infrastructure and the construction sector while the work is on in the insurance sector.
?There was a strong prime ministerial backing for all the steps we took. Both Prime Minister and the PMO were in support of most of the steps,? Jaitley said, reaffirming that the ?challenge? of the fiscal deficit target of 4.1 per cent, set by the UPA government in the interim Budget, will be achieved.
The Supreme Court early this week declared all 218 coal block allocations made from 1993 to 2010 by the centre illegal and arbitrary. The decision on the fate of the mines will be taken on Monday. There are fears that this may have an adverse impact on the core sector growth, which has shown some improvement in the current financial year.
On the Supreme Court?s decision early this week where it declared all 218 coal block allocations made from 1993 to 2010 by the centre as ?illegal?, Jaitley said that that while the decision takes away the power of arbitrary allocation, ?we can’t allow the fate of coal to in mid air. Either they have to be utilised by existing users or new users. I hope a decision on this will not linger on… if resources can’t be utilised, its adverse impact is inevitable. So I hope it wont take much time.?
When asked about the perception that in the new NDA government, the power is too centralised, Jaitley dismissed the charge saying that ministers enjoy large extent of ?decentralisation with accountability?. ?See this whole debate is not about over centralisation. For instance I look after different departments in the government and the extent of decentralisation that we enjoy is very large. But certainly if you have a very active prime minister, along with this decentralised authority which has been given to us, there will be an element of accountability,? he said, adding that the decisions were being taken by ministries even as the PM or the Prime Minister?s Office was being consulted on important issues.
INSET:
Finance minister Arun Jaitley said that he would like the central bank to announce a cut in interest rates soon. Responding to a query as to when the industry can expect a cut in interest rates, Jaitley said, ?Left to myself I hope very soon. I hope that those who decide are also listening.? The RBI has been maintaining a hawkish stance with regards to the monetary policy on the grounds that inflation is still too high for comfort. Consumer prices rose 7.96 per cent in July, compared with a year earlier, after climbing 7.46 per cent in June. However, the stance has attracted criticism from the industry, which argues that high interest rates have been choking growth and investments.
