|
India to further open up flagging economy
(China Daily)
Updated: 2009-06-05 08:11 NEW DELHI: India's government is likely to allow greater overseas investment, sell stakes in state-run companies and inject more capital into lenders to revive an economy growing at the slowest pace since 2003, its president said. "Foreign direct investment needs to be encouraged through an appropriate policy regime," President Pratibha Devisingh Patil said. "There is also a need to augment resources in the banking and the insurance sector. Toward this end, my government will recapitalize the public-sector banks to strengthen their financial position." The government will also develop a roadmap for selling stakes in state-run companies, she said in New Delhi yesterday as she unveiled Prime Minister Manmohan Singh's plans in a presentation to a joint session of parliament. Indian shares have jumped 21 percent since the May 16 election, which returned Singh's government to power without relying on support from leftist parties that had blocked economic reforms during the previous term. The Reserve Bank of India has cut interest rates six times since October and the government has cut taxes to spur growth. "The current financial year is expected to see a slowing down of growth on account of the global recession," Patil said. "Our immediate priority must be to focus on management of the economy that will counter the effect of the global slowdown by a combination of sectoral and macro-level policies," she said. The central bank, which estimates that interest-rate cuts and the government's measures together provide a stimulus worth 7 percent of gross domestic product, forecasts the economy will grow 6 percent in the fiscal year that started April 1. That compares with average growth of 8.6 percent in the previous five years. India's fiscal year runs from April 1 to March 31. Outperformer
It's a "matter of satisfaction that the Indian economy has not suffered the kind of slowdown that has been witnessed in almost every other country of the world", Patil said. India may outperform China and other countries in the Asia-Pacific region in terms of economic growth, said Stephen Roach, chairman of Morgan Stanley Asia. The Indian economy stabilized in the first quarter, maintaining the 5.8 percent pace of expansion recorded in the preceding three months. Growth in China's GDP slowed to 6.1 percent from 6.8 percent in the same period. "My government will focus attention on sectors that are adversely affected, especially small companies, exports, textiles, commercial vehicles, infrastructure and housing," the president said. India is "firmly committed to maintaining high growth with low inflation particularly in relation to prices of essential agricultural and industrial commodities". Growing deficit Patil also expressed concern over the government's widening budget deficit and spoke of the need to return to fiscal prudence. The government will "steadfastly observe fiscal responsibility" so that its ability to invest in essential social and economic infrastructure is "continuously enhanced", she said. "This will require that all subsidies reach only the truly needy and poor sections of our society." India's fiscal deficit widened to a seven-year high of 6.2 percent of GDP in the 12 months ended March 31 as the government borrowed more to fund its stimulus packages. Bloomberg News (China Daily 06/05/2009 page16) |
