Friday, June 14, 2013

What Finance Minister P. Chidambaram had to say on June 13

New Delhi: Finance Minister P. Chidambaram seemed quite satisfied that the Indian economy was in a better position than when he took over on August 6 last year. He said, "Can there be any doubt that economy is better than it was last August." He said that a number of measures had to be taken to revive the economy: 1. Fiscal consolidation; 2. Moderating inflation; 3. Reviving investments. He observed he found there is enormous good will for India and that a lot of people who keep faith in India growth story. "After nine months, steps we have taken have delivered." Then he read out a slightly lengthy extract from the Fitch's -- the rating agency -- statement about India, appreciating the Indian government's measures.He said that the reforms measures are painstaking and that one does not see the results immediately. "It is not an ODI match,"he reminded and "that is not the way reforms take place. We have to take a long-term view." And continuing with cricketing metaphor, he observed "If we do not take our eyes off the ball" the economy will do well. "I am looking forward to more reforms. I could not agree more with the Fitch that more reforms are needed," he said. Chidambaram announced that before the end of June, the government will take decisions on 1. Coal pricing and coal allocation to power projects; 2. Gas pricing; 3. FDI limits, where caps will be removed where there is no need for them, and caps will be increased where it is necessary to keep the caps on. "In June itself a number of decisions will be taken and implemented, accelerate reforms and spur investment." He said that Plan and non-Plan expenditures were on target, with non-Plan expenditure in April standing at 6.9 per cent of the Budgetary Estimates, and Plan expenditure at 4.5 per cent of the Budgetary Estimates. "We will not compress expenditures,"he said. Ministries and departments have been asked to spend and bring proposals to cabinet for spending. "Government spending, public spending will help growth,"he said. He said that though the sliding rupee is a matter of concern, there is no need for panic. he explained that countries with large current account deficit are facing the same situation of their respective currencies weakening, and South Africa, Brazil, Mexico, Chile and Turkey were in the same situation as India. He said that between August 2011 and July 2012, the Rupee fell from Rs 44/45 against the US dollar to Rs 54 per US dollar, and between August, 2012 and May, 2013 the rupee stayed at Rs 54 ad Rs 55 against the US dollar. He said the rupee will find its own level, and that it will regain losses suffered in the last few days. He admitted that a weakening rupee puts pressure on inflation and puts pressure of subsidy of imports. He said that the SEBI has put out a press release on June 12 and with the concurrence of the RBI, expanded the sovereign debt fund from US$ 25 b to US$30 b. He explained that one of the reasons for the recent currency slide was due to the fall in the 10year G-Sec bonds and the rise in U 16-year bonds.The investor is taking a call and all this will settle down, he said. "Yields in India are still very attractive at 7.22 per cent. Investors will come back. Indian markets offer the best yields in the world,"he said. He said he was happy that gold imports have come sharply down, from US$ 135 m to US$36 m. "If people of India do not import gold for a year, the whole situation will change dramatically. I will once again appeal to every person please resist the temptation to buy gold." He observed, "Ultimately, the key is investment. Investment is key to growth. It is not a matter of ideology. It is economics." he said a mission director has been appointed for the DBT (Direct Benefit Transfers) system will include the LPG, and it will change the manner in which LPG is delivered, and it will help 12 crore people. On disinvestment, he said the disinvestment of 9.33 per cent shares of the MMTC (Mining and Minerals Trading Corporation ) will be done. And that talks are going on with trade unions about disinvestment in Coal India."All disinvestment proceeds will go to capital investments. Rs 20,000 crore from Coal India investment will go to capitalisation of public sector banks. My appeal to unions is have no fear. The money is being put back into public sector banks." Asked if the improved economic indicators will help salvage the political image of the government, Chidambaram said that there was nothing wrong with the political image of the government and that as a matter of fact it is better than the political image of many others.

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