NEW DELHI--India's economic growth is expected to slow to around 6% in the current fiscal year, dragged by domestic issues such as supply side limitations as well as the global economic slowdown, but the government is focussed on getting the country back on a growth path, Prime Minister Manmohan Singh said.
"Our exports have shrunk and the fiscal deficit has gone up on account of a variety of factors," Mr. Singh said in a speech at an awards ceremony in Mumbai late Saturday.
Faced with a dramatic slowdown in the economy - the pace of growth is the slowest in nearly a decade - and warnings from ratings firms that the country needs to quickly boost capital inflows and narrow its fiscal deficit,
New Delhi has taken several steps since mid-September to allow for more foreign investment to attract capital in an attempt to support a widening current account deficit and to slash government subsidies on diesel in an attempt to rein in the budget gap.
The government has laid out a fiscal deficit roadmap, planning to bring the deficit down to 5.3% of gross domestic product this year, and further to 3.0% by 2016-17.
The fiscal deficit was 5.8% of GDP in the last fiscal year, when growth slowed to 6.5%, compared with over 8.0% growth in the recent past.
Investors have applauded the government's recent moves, which amount to some of the most significant reforms since India started opening its economy in 1991.
However, the steps, which include clearance for foreign investment in multibrand retail, face execution risks due to intense political opposition from both within and outside of the coalition government.
Measures such as those allowing for higher foreign investment in the insurance sector as well as measures allowing foreign funds in the pension sector for the first time need to be approved by parliament, which, Mr. Singh hopes will happen as soon as possible.
Mr. Singh admitted that delays in a large number of infrastructure projects due to late clearances have played a part in the overall slowdown. "In the power sector, fuel supply has been a problem.
In fact, the pricing system across the entire chain in the power sector needs to be rationalised," he said, adding that New Delhi is trying to resolve the situation by ramping up coal production and promoting pooling of imported coal.
"Investment in infrastructure has to be in the vanguard of public investment for many years to come and we are working in that direction," he said.
Experts estimate that problems associated with India's infrastructure -- including roads, ports and airports -- shave off about two percentage points from its gross domestic product growth annually, making a speedy overhaul of power infrastructure crucial to boosting economic growth.
The government is expected to decide on setting up a National Investment Board, aimed at providing one-stop clearance for large infrastructure projects, within the next two-three weeks, the government said late last week.
According to the plan, the board would provide clearance for infrastructure projects of $200 million and above to avoid delays due to bureaucratic hurdles and multiplicity of authorities involved.
The Prime Minister also backed the Reserve Bank of India's decision not to lower key lending rates despite the finance ministry and the industry seeking a rate cut to boost growth.
The Reserve Bank of India stood pat on rates to keep stubbornly high inflation in check. "We must recognize that lower inflation is good both for growth and for making growth more socially inclusive," Mr. Singh said.
India is also making efforts to correct the negative perception about the country among investors due to two recent tax policies--the General Anti Avoidance Rules and a retrospective law amendment to tax foreign deals involving local assets, Mr Singh said.
The measures, proposed in March, had hurt capital inflows, forcing the government to postpone the implementation of the GAAR by a year and to set up a panel of experts to review both policies.
"We hope to announce decisions on all of these issues within the next few weeks," Mr. Singh said.
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"Our exports have shrunk and the fiscal deficit has gone up on account of a variety of factors," Mr. Singh said in a speech at an awards ceremony in Mumbai late Saturday.
Faced with a dramatic slowdown in the economy - the pace of growth is the slowest in nearly a decade - and warnings from ratings firms that the country needs to quickly boost capital inflows and narrow its fiscal deficit,
New Delhi has taken several steps since mid-September to allow for more foreign investment to attract capital in an attempt to support a widening current account deficit and to slash government subsidies on diesel in an attempt to rein in the budget gap.
The government has laid out a fiscal deficit roadmap, planning to bring the deficit down to 5.3% of gross domestic product this year, and further to 3.0% by 2016-17.
The fiscal deficit was 5.8% of GDP in the last fiscal year, when growth slowed to 6.5%, compared with over 8.0% growth in the recent past.
Investors have applauded the government's recent moves, which amount to some of the most significant reforms since India started opening its economy in 1991.
However, the steps, which include clearance for foreign investment in multibrand retail, face execution risks due to intense political opposition from both within and outside of the coalition government.
Measures such as those allowing for higher foreign investment in the insurance sector as well as measures allowing foreign funds in the pension sector for the first time need to be approved by parliament, which, Mr. Singh hopes will happen as soon as possible.
Mr. Singh admitted that delays in a large number of infrastructure projects due to late clearances have played a part in the overall slowdown. "In the power sector, fuel supply has been a problem.
In fact, the pricing system across the entire chain in the power sector needs to be rationalised," he said, adding that New Delhi is trying to resolve the situation by ramping up coal production and promoting pooling of imported coal.
"Investment in infrastructure has to be in the vanguard of public investment for many years to come and we are working in that direction," he said.
Experts estimate that problems associated with India's infrastructure -- including roads, ports and airports -- shave off about two percentage points from its gross domestic product growth annually, making a speedy overhaul of power infrastructure crucial to boosting economic growth.
The government is expected to decide on setting up a National Investment Board, aimed at providing one-stop clearance for large infrastructure projects, within the next two-three weeks, the government said late last week.
According to the plan, the board would provide clearance for infrastructure projects of $200 million and above to avoid delays due to bureaucratic hurdles and multiplicity of authorities involved.
The Prime Minister also backed the Reserve Bank of India's decision not to lower key lending rates despite the finance ministry and the industry seeking a rate cut to boost growth.
The Reserve Bank of India stood pat on rates to keep stubbornly high inflation in check. "We must recognize that lower inflation is good both for growth and for making growth more socially inclusive," Mr. Singh said.
India is also making efforts to correct the negative perception about the country among investors due to two recent tax policies--the General Anti Avoidance Rules and a retrospective law amendment to tax foreign deals involving local assets, Mr Singh said.
The measures, proposed in March, had hurt capital inflows, forcing the government to postpone the implementation of the GAAR by a year and to set up a panel of experts to review both policies.
"We hope to announce decisions on all of these issues within the next few weeks," Mr. Singh said.
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