Dismissing concerns over a perceived slowdown in the economy, Finance Minister Arun Jaitley on Thursday said that the improved prospects of the global economy will have a positive impact on India.
“If the world economy moves up, a consequential impact on the Indian economy will follow. This is one of the reasons why the Indian economy is destined to move up,” he told investors at an interactive session organised by industry chamber FICCI.
His comments come in the wake of the International Monetary Fund upgrading growth forecasts for the global economy, though it has scaled down India’s GDP growth projection for 2017.
Commenting on the impact of demonetisation and the roll out of the goods and services tax that pulled down GDP growth to a three year low of 5.7 per cent in the first quarter, the Minister said, “When you undertake structural reforms of this kind, there can be short term impact for one to two quarters. But it shouldn’t have a long-term impact."
Referring to the improved data on industrial output at 4.3 per cent in August, Economic Affairs Secretary Subhash Chandra Garg said that September onwards, the data will show significant economic recovery.
Woos investors
Urging investors to consider investing in India, Jaitley said that opportunities in India are “tremendously wide” and said that the government is hopeful of foreign investments in the aviation and defence sector. “The aviation sector is expanding and there is huge expansion over the next few decades. US companies are natural investors,” he said, adding that even in the defence sector, the government wants foreign companies to set up partnerships with Indian firms for manufacturing units in the country.
Labour problem overstated
He downplayed concerns over pending land and labour reforms and said that States have huge government land that they can provide for setting up industrial units. They are also free to amend their Land Acquisition Laws.
“The labour problem in India is a little overstated,” he said, adding that the age of strikes is long over. He noted that recent reforms in aviation and banking did not see any major problems from labour unions.
Further, a Group of Ministers is also finalising Labour Codes. “One Labour Code is in Parliament and another will be taken up by the Union Cabinet soon,” he said.
Fiscal prudence
Jaitley also said that the government will stick to fiscal prudence and indicated that it will meet the fiscal deficit target of 3.2 per cent of the GDP for 2017-18. “Our priorities include fiscal prudence at a very high level,” he said.
While direct tax collections in the first six months of the fiscal are almost on target, he said that the Government will get a sense of the trend in GST receipts in another two to three months. The Minister is in Washington to attend the annual meetings of the IMF and World Bank. Earlier in the day, he held bilateral meetings with the US Treasury and Commerce Secretaries.
Commenting on his meeting, he said, “The US administration have a very clear understanding of the kind of reforms and expansion of the economy,” he said, adding that in his last four days in the US, he has seen a very positive mood about India.
(The journalist is in Washington D.C. as part of the IMF Journalism Fellowship 2017 to cover the Annual Meetings of the IMF and World Bank.)