Fundamentals are strong, premier says in Tokyo.
By R. Chandrasekaran
Prime Minister Manmohan Singh is confident of India returning to 8 percent growth pace, as the fundamentals are in tact though the country had delivered the weakest growth pace in a decade in the financial year ended March 2013.
The prime minister is on a three-day visit to Japan, where he assured the business leaders that his government will take more steps to draw foreign investments, especially in the field of infrastructure, for which Finance Minister P. Chidambaram was engaged in hard selling during the middle of the month in France, Qatar and Britain.
Singh addressed business leaders during a lunch hosted by industry chamber Nippon Keidanren on Tuesday.
For the current year, the prime minister expects the Indian economy to deliver a growth rate of around 6 percent.
His optimism comes from his confidence in the effectiveness of various initiatives taken by the government such as sops for exporters, foreign direct investment in retail sector, power exchanges and civil aviation. These apart, he sees further room for rationalization and simplification. Financial reforms are also on the cards, Singh said.
The premier also indicated that the Reserve Bank of India will kick start the process of issuing new banking license, which is also one of the reasons he thinks the current year will see much better economic activities.
However, a major challenge is going to be the various taxes imposed by different state governments, which were highlighted by the Japanese industry leaders. Singh cited difficulties in making different states to give up their right to tax and instead opt for Goods and Services Tax (GST).
Nonetheless, he indicated that the government had taken a serious of positive measures in the last six months though the implementation of GST continues to elude. Industry leaders are favoring GST because they think it will create one widespread market for similar goods and services across the nation. The proposal is facing road blocks from various state governments as they stand to lose the power to tax. They are seeking compensation to offset such revenue losses.
Given the political conditions back home in India, Singh has preferred to play it safe rather than spoil it. He said that GST implementation will be possible only by the next elected government that is likely to take office in May 2014. Till then, there could be more discussions among the states to bridge the differences.
The prime minister has batted for more Japanese investment flow into India since New Delhi gets only 4 percent of total investments from Tokyo in Asia. This is despite the oft-repeated stance of Japanese business leaders ranking India as the best promising long-term investment destination.
To contact the author, email to : rchandrasekaran@americanbazaaronline.com