Hong Kong :Confident about India sailing through global turmoils without much adverse impact, Finance Minister Arun Jaitley has said the government is focussing on strengthening the country’s real economy and harnessing its true growth potential of 8-9 per cent.
“I am one of those who believe that we have learnt to live in the era of turmoils. Whether it was Greece crisis, or China devaluation or speculations about rate hike by the US Fed.
“Everyday, something or the other impacts the market. As policy planners, we can not really hedge our bets (on these factors),” Jaitley said.
The Finance Minister, who was here for the second leg of his four-day visit to the two top global financial centres—
Singapore and Hong Kong—said there would certainly have been an impact if the US central bank had raised the rates.
“That impact on the market does create an optical impression of some kind of a turmoil,” he said, adding that the policy makers should not be perturbed by such transient factors.
“That’s why my own approach has been that rather than concentrating on what will happen in other economies and the subsequent impact on our market, we should concentrate on real economy in India and we should concentrate on our own policies, investments and on our own growth targets and on keeping our own inflation under control.
“Markets will keep moving up and down. Even if change had taken place in the Fed rate, the market would have been impacted for some period of time and then would have stabilised. That happened after what happened in China,” Jaitley said while interacting with journalists during his Hong Kong visit that ended yesterday.
He also dismissed suggestions that the business confidence in India was weak and said that “facts speak otherwise”.
“There have been a series of reforms. The government has become far more decisive. There is a lot of economic activity that is happening and even in the midst of the global economic slowdown, our figures are much better.
“India is one of the fastest growing economies in the world and certainly it can’t be amid any disappointment or disillusion,” he said.
Public investments have gone up significantly by about 39 per cent and FDI this year has improved by 49 per cent from the previous year, he added.
“Our domestic private investment has to become stable. That is down because our companies had over-stretched themselves and had excess capacity. I don’t think they lack confidence. In an economy which has grown by 7-7.5 per cent despite adverse global situation, the companies do not lack confidence.
“If our rates come down a little more, then manufacturing, infrastructure and real estate also stand a chance of picking up,” he said.
When asked if he was satisfied with this level of growth, Jaitley said India has become extremely aspirational.
“It is so aspirational now that even 7-7.5 per cent does not excite India anymore. So, India would be far more comfortable if it graduates from 6-8 per cent growth to 8-9 per cent growth,” he said.
The Minister said that the ability to restore normalcy in times of global turmoils gets much better if a country’s own systems are strong and in order.
“Therefore, the sound policy is to concentrate on real economy rather than being just impacted by what external factors do to the market,” he added.
He further said that the world has become an uncertain place because traditionally strong economies are facing their own challenges and everyone will have to live up to a situation where many unpredictable things can happen.
“Who would have thought that oil prices would go down to USD 45 level, but it did and it had its own consequences. Tomorrow, if it starts moving up, we will have to brace ourselves for that situation.
“Therefore, my priority as a policy planner in an emerging economy is that I must concentrate on making my own policies and my own basis extremely sound or as sound as I can,” Jaitley said.
He also dismissed the perception that reforms were slow.
“There are one or two decisions that the opposition is trying to block, but we will either push those decisions on the strength of our parliamentary numbers or we will follow an alternative route to achieve the same objective,” he said, while referring to GST and land laws.
“The idea is that the government must follow a clear path of reforms which can push the growth rates and the government must not dither. These things happen in all democracies, including in the US, where even Presidential proposals are blocked for years together. In India, it has happened only for a few months,” he added.
When asked what was the message he has given to investors in Singapore and Hong Kong to convince them to invest in India, Jaitley said, “First of all, people have not stopped investing.”
“People were disappointed when the last government was in power and therefore the investment levels had come down. Investment levels have picked up again, but it is extremely important to also interact with these investors and understand what are the issues which are troubling them.
“Additionally, the kind of the things we have done and the kind of things which are in pipeline in India, that have to be communicated to the investors. Therefore, some impressions which erroneously go through, have to be corrected.
“I think this has been a great opportunity that I had in Singapore and Hong Kong, and the response from the investors has been by and large quite encouraging,” he said.
Jaitley said that a lot of people in financial sector were concerned about GST and they also want bankruptcy law.
“They were concerned about multiplicity of permissions. By and large, they are quite satisfied with the fact that taxation reforms in India are moving in the right direction,” he said.
There is a lot of excitement that the investment people now have. The FDI inflows have significantly improved and investors are looking at different sectors in India, including infrastructure, smart cities, manufacturing sectors and services, he added.
“Many are cautiously optimistic because they want to closely watch the pace of reforms. They also want to watch how India further improves the business environment,” Jaitley said.
Talking about the performance of the Modi government so far, Jaitley said, “We have done reasonably well. Even in the midst of global slowdown, we have grown quite fast and faster than many other markets.
“I think we have restored the credibility of the Indian economy and of the governance. The government is decisive and is improving the life of Indians.”
Asked whether there have been any disappointments, Jaitley said the government was here “to govern, irrespective of the political hurdles that come our way as in democracy such hurdles can be created by the opponents”.
He said foreign investors have a number of opportunities available in India, from services to manufacturing to infrastructure, including power, highways and railways sectors.
“Over the next 20 years, we need a huge amount of investments and investors can come in many segments,” he said.
To a question on the recent viral news report about peons’ job in Uttar Pradesh attracting a large number of applications including from highly qualified people, Jaitley said that the unemployments indeed remains a challenge and the government is conscious of the fact that the public spending needs to be increased.
“In the first five months, the public investments have increased by 39 per cent, which is significant. Now this problem of UP is related to the government jobs and these are not very highly paid jobs.
“Therefore, for any policy planner this has to be taken as a case in point and to be responded accordingly. The response has to be to straighten our agriculture sector.
“These are mostly people coming from rural areas who have applied for these jobs. We are concentrating on rural infrastructure and irrigation,” he said, while adding that a large part of the spending is being made in those areas.
Jaitley also said that a number of people from agriculture have to be pulled out and put in manufacturing and services sectors.
The government is working on newer cities, smart cities, suburban townships, more job opportunity’s and better infrastructures to tackle these issues.
“Those in India who want the status quo to continue, opposition to land bill for example, will actually perpetuate this crisis. It is only an alternative approach which can succeed in resolving this crisis,” he said.