Return to high growth in 3 yrs: FM

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Finance minister P Chidambaram on Thursday hinted that the economy was in the process of bottoming out and it would get back to the high growth path “step by step” within the next three years.

“The slowdown reflects a worldwide trend. As the global economy recovers and our new measures take effect, I am confident that the Indian economy will also get back, step by step, to the high growth path within three years,” he said at the valedictory function of the four-day Petrotech conference. The biennial event was attended hydrocarbon experts and oil ministers from various oil-producing countries.

India’s growth slowed down to five per cent in 2012-13 and is expected to be around the same figure this financial year. The nation, one of the fast-growing large economies, was clocking over nine per cent growth for four years before the global financial crisis of 2008.

Notwithstanding the crisis, India grew at 8.6 per cent in 2009-10, 9.3 per cent in 2010-11 and 6.2 per cent in 2011-12.

The growth estimates for 2012-13 are likely to be revised upwards shortly.

“There has been a further slowdown in 2012-13 and in this financial year,” Chidambaram said, but added that fiscal prudence would continue and the red line for fiscal deficit — that is 4.8 per cent of GDP — would not be breached in this financial year.

“We are acutely aware that growth can be secured only on a strong financial foundation. We are aware of the need to raise adequate resources, expend them wisely and remain within prudent fiscal limits,” he said..

“On more than one occasion I have reiterated our unflinching commitment to contain fiscal deficit at 4.8 per cent of GDP in this financial year, and I do so again today. We will then reduce it by 0.6 per cent every year until we reach the target of 3 per cent in 2016-17,” the finance minister said.

Chidambaram claimed the government’s efforts to rein in current account deficit (CAD) were yielding “splendid results”. “Last year, we faced a daunting number of $88 billion (current account deficit). Of the total imports of $491 billion, the oil import bill alone amounted to $164 billion. Needless to say, a developing country like India cannot afford such a huge import bill or such a high level of CAD,” he said.

“Therefore, we were constrained to take some hard measures, including conservation measures, and these measures have helped us contain the CAD. I am glad to be able to say that the CAD this year will be approximately $50 billion,” he said.

Inviting investments in the energy sector, Chidambaram said India is a good long-term bet for cooperation in this sector. He cautioned that the demand for oil would pick up with the recovery in global economy, leading to volatility in prices. “Whatever supply overhang is there will be absorbed quickly. The old dilemma will raise its head once again. Oil-consuming countries will demand lower and stable prices (while) oil-producing countries will demand higher prices.”

“In 2008 when crude prices touched $147 a barrel, if I may say so (it) virtually robbed every developing country of 1-2 per cent of its growth rate,” he said.


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