PM proposes infrastructure push to pump-prime economy

Prime Minister Manmohan Singh today announced a slew of measures, including new initiatives in the infrastructure sector, to give a fresh push to economic growth.

For this, there is a need to create a climate that is suitable for investment, especially in the infrastructure sector, he said while addressing the annual general meeting of the Confederation of Indian Industry (CCI) in New Delhi today.

''The most important thing we can do to revive the investment climate domestically is to deal with the many impediments affecting the implementation of infrastructure projects,'' the prime minister said.

He said the government has taken a slew of measures to remove the impediments that hamper infrastructure development.

The cabinet committee on investment (CCI), set up in December 2012, has made significant progress in clearing large projects, which were held up for long, he said.

In the petroleum sector, he said, investments worth $20 billion for exploration and production activity in 40 oil blocks had been held up for many years because of security clearances.

The prime minister said the government would be giving final clearances to 31 oil blocks in the next two weeks.

''Clearances for 12 coal mining projects have also been fast-tracked. These projects would add 37 million tonnes to our annual coal production,'' he said.

He said the government is also addressing the problem of fuel supply - both coal and gas - to power projects.

''The ministries are working to reach a resolution to these problems in a time bound manner. I hope we will see results in next three weeks,'' he said.

On the pending Land Acquisition Bill, the prime minister said the cabinet has already cleared it and will be before Parliament soon.

The Indian economy is currently growing at a very slow pace of around 5 per cent, but this is not a permanent reduction in our longer-term growth potential and it is necessary to evolve the right strategy so as to get the economy back to a long-term growth path, he said.

''Our economy grew at 8 per cent over the past ten years. If we go back to 15 years the average was also 7.5 per cent. This kind of dynamism doesn't disappear suddenly, and we must prove the prophets of gloom wrong. We are seeing, I believe, a temporary downturn, which does happen.''

''I believe we have seen a temporary downturn, which does happen from time to time. We must recognise it as such and take corrective action,'' he said.

It all depends on one's perception. If the business mood was outright optimistic in 2007, it is unduly pessimistic today and this needs correction, he said.

''In 2007, the government had almost become irrelevant because India was destined to grow at 9 per cent whatever the government does. The consensus today is that unless the government acts swiftly, our growth, which has already decelerated, will be perennially stuck at 5 per cent.''

The prime minister said the role of the government is still limited and there is really not much the government can and must do.

''Government is not the prime mover of growth. In a private sector led economy – and I repeat, we are a private sector led economy with 75 per cent of investment being in the private sector, which includes farmers, small businesses and the corporate sector – the driver of growth is indeed private investment.

''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,'' he said.

The prime minister also hinted at more reforms on the foreign investment front so as to encourage foreign investors use India as a part of their global supply chain.

''The liberalisation of FDI in multi-brand retail, civil aviation and other areas, are important signals. We are reviewing the FDI policy comprehensively to see what more can be done in the coming months,'' he said.

At the same time, the prime minister said, the government has to deal with the domestic problem of restoring macro-economic balance. The phased roll-back of fiscal stimulus announced in 2008 as also the subsidies are part of the measures aimed at fiscal consolidation, he added.

''Over the last 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. Most countries that followed this policy are now reversing the process. We must do so also.''

He said the union budget has set a target to reduce fiscal deficit by 0.5 percentage points in 2013-14, followed by annual reductions on a continuous basis up to 2016-17.

''We are determined to do everything possible to achieve this target,'' he said.

He said the rising current account deficit, which is expected to be around 5 per cent of GDP this fiscal is the bigger concern. This is more than twice the traditional comfort level of, say, 2.5 per cent. Some reduction in this deficit is expected in 2013-14 as there is lower target for fiscal deficit and also the lower subsidies on petroleum products. Initially, this reduction will be modest.

''We must, therefore, plan to finance a higher than normal current account deficit in our balance of payments for a few years. We financed a CAD of over $90 billion in 2012-13 without a loss in our foreign reserves. We will take all steps to ensure that inflows remain strong for the next two years,'' he said.

''If we can return to the high growth path that we were on a few years back, it would bring about a transformation in our economy in ten years generating new employment opportunities for our young people and reducing age old poverty to very low levels,'' he said.

''Each one of us, as also the world at large, has a stake in India's economic rise as a plural, liberal and secular democracy, the prime minister added.