Signalling more reforms in the coming days, Prime Minister Manmohan Singh today said the government will do everything to "allay and alter the economic situation".
"The government is committed to do everything to put economy back on a high growth path of 8-9 per cent. The steps we have taken recently are only the beginning of the process to revive our economy and take it back to its trend growth rate of 8-9 per cent," Singh said at the 85th Annual General Meeting of Ficci in New Delhi.
Dr Singh said the global economy is passing through turbulent times and "excessive pessimism" at home has hurt the country's growth process. "The Indian economy was doing great in 2008, but then the global slowdown took its toll and we got impacted ... Excessive pessimism at home has affected growth process ... the economic situation in Europe remains a cause for concern. The US and China are still witnessing tough times. When the global situation will improve cannot be predicted," the Prime Minister said, "... but I stand before you to reassure you that our government is committed to doing everything that is possible to alter the policy environment, accelerate economic growth and make the growth process socially and regionally more inclusive."
"Though the government is committed to accelerate economic growth, high fiscal deficit remains a worry," he said. Last year, fiscal deficit hit 5.9 per cent. "This is unsustainable," he said, adding that the Finance Minister has a road map ready to bring down the fiscal deficit to 5.3 per cent this year.
Explaining why he was so confident that the fiscal deficit will be brought down this year, the Prime Minister said, "reduction in subsidy across categories will definitely help us achieve that aim".
Concerned over high inflation, Dr. Singh said inflation rates in last two years have increased to unacceptable levels and need to be brought down to 5-6 per cent.
In an apparent dig on parties which oppose reforms, the Prime Minister said: "Some of the decisions we've taken recently were politically difficult. Those opposed to reforms are either ignorant or constrained by outdated ideologies. The naysayers and the cynics have tried to halt us in our track, but we had the courage of our conviction and the interests of our people at heart."
Committing to further reforms, the Prime Minister said, "We need to complete the exercise that has begun on GAAR (General Anti Avoidance Rules) and taxation of the IT sector ... We will also speed up the disinvestment process which will also revive our equity markets."
Referring to opposition to opening of the retail sector to global supermarkets, Singh said: "I am afraid that those who oppose these moves are either ignorant of global realities or are constrained by outdated ideologies. "For example, when I hear the debate on FDI in retail, what I hear are arguments against large scale organised retail, not against FDI in retail".
The Prime Minister also assured the industry that two ambitious tax reforms - Direct Taxes Code (DTC) and Goods and Services Tax (GST) - are high on government's priority list. Dr. Singh said that while it is a matter of satisfaction that India's per capita income level has increased, he is 'pained' to see the level of social and regional inequalities that continue to exist in the country.
"The years of high growth enabled us to generate resources that have been deployed to improve the well being of our people. But we need to do more to eradicate poverty, ignorance and disease from this blessed land of ours," Dr. Singh said. He, however, added that despite the challenges that India continues to face, "we must recognise that poverty has declined at a pace never seen in the past 200 years".
Dr. Singh further said that although the subsidies have an important role to play in "softening the harsh edges of extreme poverty", the outgo on this front has grown in the recent years which is constraining the government in its efforts for the economic well being and empowerment of people.
"Under-pricing of energy, particularly electricity and petroleum products, has greatly affected the resources
available for investments in infrastructure and social development. The subsidy on oil alone is more than what the government spends on health and education put together.
"We need to address these issues even as we ensure that the poor and the vulnerable are protected," Dr. Singh said, adding that Aadhaar based direct cash transfer will help reduce leakages of subsidies, cut down corruption, eliminate middlemen, target beneficiaries better and speed up transfer of benefits to individuals."
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.
Stressing on the need for "compact between business, government and society", Dr. Singh said the private sector must own up its responsibility in supporting affirmative action designed to provide employment opportunities for under privileged sections, persons with disabilities and women.
He also said that the private sector must play an active role in areas of research and development, education and skill development, health and rural development.
The Prime Minister informed the industry leaders that the Railways is working on a Rail Tariff Authority, which will make fare setting a "more rational exercise".
On Land Acquisition Bill, he said it "should soon usher in a more fair and transparent regime for land acquisition". The Union Cabinet cleared the Land Bill last week.
The Prime Minister further said that the Cabinet Committee on Investment, which was cleared by the Cabinet earlier this week, would help in clearance of major projects in a time-bound manner.
Dr Singh's comments come a day after Finance Minister P Chidambaram hinted at some tough measures in the coming days, saying some "bitter medicine" is necessary to restore the health of the economy.
"Some bitter medicine has to be taken this year... There is no other way... This bitter medicine is good medicine. It will restore the health of the economy and next year we can look forward to much higher growth," he said, adding that he expected the economy to rebound strongly prior to the next Budget. MOre reforms are needed
Mr Chidambaram was winding up a discussion on the first batch of supplementary demands for grants in the Lok Sabha.
After growing at over nine per cent, the GDP slipped to nine-year low of 6.5 per cent in 2011-12 and during the current year, as per the RBI projection, is estimated to be 5.8 per cent.
The Finance Minister also expressed confidence that inflation, which has continued to remain a concern and a challenge, would moderate in the next two to three months.
"Inflation is a challenge. Inflation worries the government. While CPI inflation is sticky, good news is that WPI inflation seems to be trending downwards...If it trends downwards, there will be some reason for comfort," he said.
Later on Friday, amid a walk out by BJP and Trinamool Congress, the Lok Sabha passed the first batch of supplementary demands for grants that seek to raise government expenditure by Rs. 32,120 crore in 2012-13.
Of the total cash outgo of Rs. 30,804 crore, Rs. 28,500 would be towards oil subsidy and Rs. 2,000 crore for rehabilitating Air India.
On Thursday, taking forward the reforms drive unleashed in September, the Union Cabinet gave a go-ahead for the Cabinet Committee on Investment under the Prime Minister to fast-track approvals for mega projects of over Rs 1,000 crore. Besides, it cleared the Land Acquisition Bill to facilitate industrialisation. Urea investment policy also got the Cabinet's nod, which also slashed by 30 per cent the base price for telecom airwaves in four circles, including Delhi and Mumbai, that went unsold in the spectrum auction that concluded last month.
The series of decisions comes amid an effort by the government to the much criticised policy logjam. In September, the government opened up the economy to foreign investment in multi-brand retail, thus paving the way for foreign retail chains to enter the country. It also allowed foreign airlines to invest in domestic carriers and also liberalised foreign investment in insurance and pension fund.
With inputs from PTI