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 Court’s 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