In­dia’s growth due to re­forms, not fall in the price of crude

Says oil’s fall helped, but main driver was pru­dent pol­icy

The Financial Express - - FRONT PAGE -

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

Bloomberg edi­tor-in-chief John Mick­leth­wait with PM Naren­dra Modi at the Bloomberg In­dia Eco­nomic Fo­rum 2016

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