Economy Slowing, 9 Percent Growth Target Needs Re-look, Says Pm

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Prime Minister Manmohan Singh today asked parliamentary parties to strike a balance between adversarial political positions on issues and cooperating on long-term national agenda. He said development should not become hostage to short-term concerns.

He also appealed to various stakeholders to reverse the mood of “negativism” because both optimism and pessimism have an infectious quality. He was addressing the the National Development Council (NDC) in the national capital. The NDC, attended by Union ministers, chief ministers and Planning Commission members, would discuss the Approach Paper of the 12th Five Year Plan.


"He also appealed to various stakeholders to reverse the mood of "negativism" because both optimism and pessimism have an infectious quality."


“The future is what we make of it. Nothing is ordained or pre-determined. India can rise, but India can also falter. We live in a world of rising and faltering economies…We can either become victims of negativism, criticising ourselves all the way, or work together to put ourselves firmly in the group of rising economies,” he said.

He said elected governments can only deliver if the political process worked to allow government to function in a manner where the needs of longer term development do not become hostage to short term concerns. “What this means is that parliamentary parties have to strike a difficult balance between maintaining adversarial political positions on many issues, while also cooperating to advance longer term national agenda. This balance is not easy to strike,” he added.

In an apparent hint at judicial overreach, he said at times like this, it was of vital importance that democratic institutions, like the executive, judiciary, Parliament and state legislatures, constitutional and regulatory authorities, understand their due role and play that in a constructive manner.

On the nine percent growth target for the12th Plan, the Prime Minister said, “It is relevant to ask whether this is feasible since the economy is currently slowing down”. Growth rates, he added, were being revised downwards in all the countries for the current year.

He pointed out that the world is going through a major realignment of economic power and emerging markets are becoming important. “Our policies in the 12th Five Year Plan must, therefore, be shaped to take full advantage of these emerging possibilities,” he said.

Although much of the growth is driven by private sector, the government has a role to play in providing a policy environment for encouraging farmers and entrepreneurs. “This includes an environment of macro-economic stability, efficient functioning markets… a sound financial system for allocating financial resources, good governance with transparency and effective enforcement of the rule of law,” Singh added.

Finance Minister Pranab Mukherjee said [url="http://www.debtreliefcenter.org/Debt_Settlement/"]the debt[/url] crisis in Europe and slowdown in the US are having an adverse impact on India, but the fundamentals of the country’s economy remain intact.

“While there may be some moderation in growth in the current fiscal, the fundamentals of the economy are intact and the medium-term growth prospects remain buoyant”.

However, Mukherjee said as the country has become increasingly globalised. It means, he said, “when the world sneezes, India runs risk of catching a cold. Not surprisingly, the economic crisis in Europe and the slowdown in the US are impacting us adversely”.

Indian economy, which recorded a growth rate of 8.5 percent in 2010-11, is expected to moderate to about 8 percent during the current fiscal. In the April-June period of 2011-12 the growth slipped to 7.7 percent, slowest in six quarters.

Mukherjee further said that unlike in 2008-09, the government doesn’t have an elbow room for economic stimulus as it committed towards fiscal consolidation. In the Budget 2011-12 the government has envisaged a fiscal consolidation path and aims to bring down fiscal deficit to 4.6 per cent of GDP in the current fiscal.

“As finance minister, I stand committed to this path of fiscal consolidation,” Mukherjee said adding, “The quality of expenditure and its multiplier effect on growth must get our attention”.

Planning Commission Deputy Chairman [url="http://en.wikipedia.org/wiki/Montek_Singh_Ahluwalia"]Montek Singh Ahluwalia[/url] warned that source of funding to the sector would soon dry up. Commercial banks have to watch their balance sheets and cannot provide loans indefinitely, he said, adding, some distribution firms have not raised tariffs for 10 years and their total losses are estimated to be Rs 70,000 crore.

On the recent problems in power generation, Mukherjee said the sector is facing shortage of coal and natural gas “Issues like land acquisition, deteriorating health of the state electricity boards and environmental clearances have also been adversely affecting this sector,” he said.

Ahluwalia said unless corrective actions are taken, the power sector will experience shrinkage of credit and loss of investor confidence and will not be able to pay money to generators.

“We have to move urgently to implement a package of distribution reforms combined with tariff increases, which will make the distribution companies viable for all additional sales,” Ahluwalia said.

[ROUDRAM]

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