In a strong affirmation of the Centres resolve to continue with its reforms drive, Prime Minister Manmohan Singh today said his government is committed to altering the present policy environment to push economic growth back to the 8-9 per cent path.
Throwing his weight behind some of the governments recent reform measures, including the much-debated decision to allow FDI in multi-brand retail, Singh promised to allay concerns raised by the industry on the general anti-avoidance rules (GAAR) and on issues relating to the taxation of the information technology sector.
In an address to industry leaders at FICCIs annual general meeting here, Singh accorded high priority to the finalisation of the direct taxes code (DTC) and the goods and services tax (GST) measures.
Admitting that a year or two of excessive pessimism at home has hurt the growth process, he said: We are today seized of the need to step up investment and savings rates commensurate with the requirements of 8-9 per cent GDP growth in the Twelfth Five Year Plan... The steps that we have taken recently are only the beginning of a process to revive our economy and take it back to its trend growth rate of 8 to 9 per cent.
Justifying the governments decision to allow FDI in multi-brand retail, Singh said that those opposing the move are either ignorant of global realities or are constrained by out-dated ideologies. For example, when I hear the debate on foreign direct investment in retail, what I hear are arguments against large-scale organised retail, and not against foreign direct investment in retail.
Assuring the industry of two ambitious tax reforms, the DTC and GST, Singh said that corporates must also own up their responsibility in supporting affirmative action designed to provide employment opportunities for under-privileged sections.
The Prime Minister also reiterated the governments commitment to bring down the high fiscal deficit to 5.3 per cent of GDP this year and lowering it to 3 per cent of GDP by 2016-17.
Maintaining that the level of inflation has been unacceptably high in the last two years, he said the government will work towards bringing it down to no more than 5-6 per cent per annum.
On the ballooning subsidy bill, Singh said the government plans to provide direct cash transfer into bank accounts of beneficiaries of 34 centrally-sponsored schemes in 51 districts from January 1 and expand it to the whole country by end of 2013.
The subsidies on oil alone are more than what the government spends on health and education put together, he said.
Over the last couple of months, besides raising diesel prices and capping subsidised LPG cylinders, the government has allowed FDI in multi-brand retail and permitted foreign airlines to pick up stake in domestic carriers, along with forming a Cabinet Committee on Investment to expedite clearances of mega projects.
The government also intends to get Parliaments approval for raising FDI cap in the insurance sector to 49 per cent from 26 per cent, besides amendment to the banking laws to hike voting rights of shareholders in both private and public sector banks.
Singh said the disinvestment process will be speeded up to revive equity markets. Earlier, he had formulated a committee to address the controversial tax proposals of the budget to signal a stable tax regime for investors.
Indias growth slowed to 5.3 per cent in the second quarter of the fiscal, from 5.5 per cent in the first quarter. As per RBIs estimates, GDP for 2012-13 is likely to be 5.8 per cent. In the three years preceding the 2008 global economic crisis, India was growing at a rate of more than 9 per cent.