PM says downturn is temporary, assures India Inc of corrective measures

Terming 5 per cent gross domestic product (GDP) expansion as disappointing, Prime Minister Manmohan Singh made a case for speedy and decisive action to achieve 8 per cent economic growth.

Addressing the annual meeting of the Confederation of Indian Industry (CII), the prime minister said the country was seeing a temporary downturn and that the government was taking corrective measures to get back to 8 per cent growth.

Singh also made case for the government and businesses joining hands in writing the story of development.

The prime minister said the government will further relax the foreign direct investment (FDI) policy and take steps to bring down inflation.

Singh said India can get back to the high growth path of 8 per cent even while dealing with problems like corruption, bureaucratic inertia and the difficulties in managing coalition.

"Growth has slowed to 5 per cent, which is clearly disappointing ... We are seeing temporary downturn, partly due to global factors. We can get back to 8 per cent growth rate," he said, adding that government will take speedy and decisive action to push growth.

"We must recognise it as such and take corrective action. I do not believe our future is 5 per cent growth. We grew at an average of about 8 per cent in the last 10 years and we can get there again," the prime minister said.

He said consensus today was that unless the government acts swiftly, growth that was already decelerated, would be perennially stuck at 5 per cent.

Observing that the high fiscal deficit is unacceptable, Singh said: "We are determined to do everything possible to achieve the fiscal deficit target".

The government aims to bring down the fiscal deficit to 3 per cent of GDP by 2016-17.

As regards the Current Account Deficit (CAD), he expressed hope that it would moderate in the current financial year from a high of 5 per cent recorded in 2012-13.

The government, he said, will take all steps to ensure that foreign fund flows remain strong and restore the macro-economic balance.

"Corruption is a problem. Bureaucratic inertia is a problem. Managing coalition is not easy. But these problems have not arisen suddenly. They were all there even earlier when the economy was growing at 8 per cent", Singh added.

Highlights from PM's address:

>> Business mood which was unduly optimistic in 2007, is unduly pessimistic today, says Prime Minister Manmohan Singh.
>> Growth slowing down to 5 per cent is disappointing but can get back to 8 per cent again: PM.
>> We have to accept that exports will be weak and CAD will be higher than it should be, says PM.
>> We are seeing a temporary economic downturn, partly due to global factors. We must take corrective actions, says PM.
>> We are determined to do everything possible to achieve the fiscal deficit roadmap: PM.
>> Decline in private sector investment must be reversed. I am encouraged by progress made by Cabinet Committee on Investment: PM.
>> Govt is reviewing FDI policy comprehensively, says PM.
>> Land Acquisition Bill to soon go to Parliament: PM.
>> Corruption and inertia in bureaucracy are problems, managing coalition is not easy: PM.
>> PM expects CAD to be around 5 per cent of GDP in the current fiscal.