New Delhi: India needs to stimulate trade and investment flows, and boost a slowing domestic economy hit by deepening recessions overseas, the acting finance minister said ahead of next week’s interim budget.
The global financial crisis roiled India’s share market, and the subsequent slowdown has slashed exports and domestic factory output, and is expected to help slow growth to an estimated 7.1% in the 2008-09 fiscal year, from 9% last year.
Since October, the Reserve Bank of India (RBI) has cut its key lending rate by 350 basis points, slashed factory gate duties, announced relief schemes for exporters and pledged extra spending to protect growth and jobs.
“I am happy to say that in 2008-09 India will still grow by around 7%,” Pranab Mukherjee, the foreign minister and currently running finance, told an industry gathering on Thursday.
“There is a need to sustain our foreign trade, revive foreign investment and generate domestic demand in order to maintain our growth rates, which are essential for the uplift of the multitudes below the poverty line,” he said.
India on Wednesday simplified foreign investment rules to attract funds needed for corporate expansion.
The government is also considering the demands of exporters for tax breaks and lower borrowing costs, as industry lobby groups project 10 million job losses in the year to March.
India’s exports have contracted on an annual basis in three consecutive months since October, while imports have also slowed due to lower demand for capital goods.
Foreign investment flows into Indian companies and the equity market have slowed.
“As we stand out in the world as one of the key growth centres, I remain confident that we will be able to attract more FDI and that FII flows will return to our markets because this is where growth is happening and this is where profits can be made,” Mukherjee said.