New Delhi: Prime Minister Manmohan Singh is training his sights on five key challenges in the year ahead, targeting inclusive growth for Indians and a fair playing field for foreign investors.
In an email interview with Hindustan Times, Singh identified controlling the fiscal deficit, achieving clarity on tax matters, reviving the mutual funds and insurance industries, clearing a backlog of foreign investment proposals, and boosting infrastructure as his focus areas in the short term.
“The India growth story is intact. We will continue to work, as we have been doing for eight years, to keep the story going,” he said.
Singh has taken charge of the finance ministry temporarily after Pranab Mukherjee gave up the post to contest the presidential election as the candidate of the ruling United Progressive Alliance. It was as the finance minister in the early 1990s that Singh freed the Indian economy from a welter of stifling government controls known as the “licence raj”.
The government has, in recent months, come under attack for keeping key policy reforms relating to foreign investment in organized retail and insurance in limbo, and failing to make headway in implementing changes in taxation. Rating agencies Standard and Poor’s and Fitch have downgraded the outlook on India’s sovereign rating, citing slowing economic growth, high deficits and policy inaction.
Foreign investors and the markets have been spooked by a proposal to tax transactions retrospectively, after the government lost a legal battle with Vodafone Group Plc over a tax dispute, and the planned introduction of general anti-avoidance rules targeting deals structured in such a way as to avoid paying tax.
Singh said he wanted to show that his government would be fair, and that he was also keen to cut red tape.
“We will…work towards improving the response time of government to business proposals, cut down infructuous procedures, and make India a more business-friendly place,” he said. “We want the world to know that India treats everyone fairly and reasonably, and there will be no arbitrariness in tax matters.”
Revival of the mutual fund and insurance industries is another key goal.
“The absence of investment avenues has pushed Indian savings into gold. We need to open new doors so that savings can be recycled into productive investments that create jobs and growth, not into gold,” Singh said.
The government is also inviting investors to help build the country’s infrastructure, a key enabler of future economic growth.
“A lot of investment avenues are opening up in railways, roads, ports and civil aviation. The doors are open for the world to strengthen our hands and contribute to these vital sectors, which will give a further push to the economy,” he said.
Singh said the public debate now should move to how to make an open economy work, and work for all.
“It is necessary that we change the discourse from a critique of an open economy to a critique of what is needed to make an open economy work better for the welfare of the people,” he said.
“Lastly, there is the issue of distribution. We have lifted millions out of poverty. But I worry that the fruits of an open economy will be increasingly captured by fewer people. I worry that a large segment of our population will be left out of the benefits of economic growth. We need to correct that fast,” he said.
Singh pointed to investment plans by soft-drink maker Coca-Cola Co. and furniture group IKEA as proof that things had not deteriorated greatly. “The chairman of GE captured the picture correctly when he said ‘the mood in the market is worse than the mood on the ground’. I agree with that,” he said.
Asked about the road map for key pending reforms in pensions, insurance and banking, Singh said legislation was not the bottleneck.
“More important is that we need political consensus in the government on some policies. These are genuine differences in opinion. So, in a democracy, consensus building is the key to long-term economic success, and we are steadily moving ahead in doing that.”
He denied that corruption was rampant in the government, which has battled several charges of malfeasance, including in the allotment of 2G spectrum and the organization of the Commonwealth Games .
“Just as the pessimism over the economy is more in the markets and less on the ground, even in the case of corruption, I do not think there has been any explosion in corruption under my watch,” he said.
Singh said he was looking forward to visiting neighbour Pakistan, though there had to be “suitable outcomes” for such a visit.
The 79-year-old economist said he had “tried sincerely throughout my life to make India a better place to live, work and lead a fulfilling life”.
“We have tried to build a peaceful, harmonious, secure, friendly, prosperous India where every citizen can aspire for the best in life. We have an unfinished agenda. I will leave it to history to judge whether I was successful,” he said.