At G20, India's PM vows to revive growth

Says Tough Steps Will Be Taken To Attract Investors, Hints At Subsidy Cut

NewDelhi:The UPA government is determined to take tough steps, including controlling of subsidies, to revive investor sentiment, Prime Minister Manmohan Singh said on Tuesday. 
    The tough talk on reforms comes a day after global ratings agency Fitch joined Standard & Poor's to cut the outlook on India's rating to negative from stable citing slowing growth, lack of reforms and weakness in public finances. The Reserve Bank of India (RBI), which kept interest rates unchanged on Monday, had also put the ball in the government's court and had talked about easing supply bottlenecks to tame inflation. "Like other countries, we too allowed the fiscal deficit to expand after 2008 to impart a stimulus. We are now focusing on reversing the expansion," Singh said at the plenary session of the G20 meeting in Los Cabos in Mexico. 
    "This will require tough decisions, including on controlling subsidies, which we are determined to take," Singh said. The RBI on Monday said it had frontloaded the policy rate reduction in April with a cut of 50 basis points and that this decision was based on the premise that the process of fiscal consolidation critical for inflation management would get underway, along with other supply-side initiatives. It also said subsidy burden on the government was crowding out public investment at a time when reviving investment, both public and private, was a critical imperative. The Prime Minister said the government will devise transparent policies which will provide a level playing field to both domestic and foreign investors. 
    The UPA government has faced strong criticism for its policy of retrospective taxation and handling of the Vodafone tax issue. Investors have slammed the government's unpredictable policies and have stayed on the sidelines. Economists have doubted the government's ability to meet the fiscal deficit target of 5.1% of gross domestic product for 2012-13. "Investment has been affected by the adverse global climate which impacts both foreign and domestic investors. We are taking steps to revive investor sentiment," Singh said referring to the slowdown in investment. "We are determined to create an environment that would boost investor sentiment and promote an atmosphere conducive to enterprise and creativity," he added. 
    Singh said the fundamentals of the economy remained strong and the government was confident of returning to a high growth of 8-9%. "Our growth rate in 2011-12 declined to 6.5% from the level of 8.4% in the previous year. This may look like a reasonable figure, given growth rates being experienced in the rest of the world, but our public is impatient for a return to high growth and faster jobs creation," he said. Singh also outlined the steps taken by the government to shore up infrastructure investment. "We are focusing heavily on infrastructure investment and in this context we have set ambitious targets to keep infrastructure investment on track and also put in place a problem resolution mechanism to overcome implementation bottlenecks," the Prime Minister said.

PM Manmohan Singh with German chancellor Angela Merkel at Los Cabos during the G20 summit on Monday