India’s growth due to reforms, not fall in the price of crude
Says oil’s fall helped, but main driver was prudent policy
New Delhi, March 28: Prime Minister Narendra Modi on Monday said the growth in the Indian economy was led by some of the reforms undertaken by his government since taking over in May 2014, and not by the fall in crude oil prices, a move that has resulted in the South Asian nation being recognised as the fastest growing country in 2015.
“India’s economic success is the result of prudence, sound policy and effective management,” Modi said at the Bloomberg India Economic Forum 2016 in New Delhi. In 2008-09 crude oil prices had fallen more sharply than they did in 201415. However, in 2008-09 the fiscal deficit, current account deficit, and inflation were all substantially worse,” he said, adding: “In 2015-16, all these have improved from a lower base.”
Citing that many emerging countries rely on imported crude, the PM said it was true that India benefited from low oil prices and that should have been the similar case with other emerging countries as well.
The PM's comments come weeks after the Economic Survey predicting that the country's gross domestic produce could grow by a broad range of 7-7.5% for the next fiscal that begins April 1, while at the same time indicating that the economy may take a hit if the world's economy slows further. For the moment, the government has been trying to jump-start the economy through public ex- penditure and increasing local consumption while the private sector investments are still yet to come.
Still, the government has ensured that it would stick to its fiscal deficit target of 3.5% of GDP for the next fiscal that begins April 1, while at the same time increasing capital expenditure, Modi said. The PM indicated that the local consumption will be spurred by the increase in rural incomes, led by some of the recent announcements in the Union Budget and his ambitious target of doubling farmers' income by 2020.
Enlisting the increased allocation for agriculture, introducing agriculture insurance, allowing foreign investment in warehousing and cold chains to reduce farm wastage, as well as marketing of agricultural produce made and manufactured in India, Modi said all these measures have been introduced to lower the cost of production and increase net income for the farmers.
On the issue of reforms, Prime Minister Modi said the country had lacked in execution which could spur economic growth. He mentioned that the National Food Security Act, though passed as a law, had been on paper since many states had not implemented. Another example of execution is in the reduction of leakages in payments in the national rural employment guarantee act, Modi said.
In conclusion, the PM also reiterated that the government will give priority to monetary policy to contain inflation.
Bloomberg editor-in-chief John Micklethwait with PM Narendra Modi at the Bloomberg India Economic Forum 2016