India cannot remain isolated from global developments, says Pranab

Allaying fears that the Indian economy is going through a crisis, Finance Minister Pranab Mukherjee on Tuesday said the government was not suffering from any policy paralysis and that the Indian economy has the resilience to overcome the crisis.

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While addressing the Rajya Sabha during a debate on the Appropriation Bill, Mukherjee blamed the weakness in the global economy for the recent slowdown in India's industrial output and economic growth.

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"Questions have been raised...Have we entered into recession, have we entered into a phase where the economy is going to be derailed, have we entered into a situation where we cannot improve the situation and move ahead."

The finance minister said these perceptions were not true and the Indian economy has the capacity and resilience to over the crisis.

"If you look at the performance of the economy, particularly in the crisis situation, you will notice that India workers, Indian farmers, Indian entrepreneurs have the capacity and resilience to overcome the crisis," he said.

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Mukherjee also said there was no policy paralysis within the government. "It is not so," he said. "In the last couple of months, we have not only taken initiative, but have also finalised policies. Actions are being taken," he said.

India's economic growth has decelerated sharply this year. The growth declined to 7.7 per cent in the first quarter of 2011-12 and it fell further to 6.9 per cent in the second quarter against the government's budgetary target of around 9 per cent.

Industrial output slumped into negative territory in October, raising fears of overall slowdown in the economy. Factory output, measured in terms of the Index of Industrial Production (IIP), slumped to minus-5.1 per cent in October, according to the official data released on Monday.

Mukherjee blamed the ongoing crisis in Europe and other parts of the world for the slowdown in the Indian economy. "Indian economy cannot remain isolated from the global developments."

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However, the finance minister expressed hope that things were likely soon to improve in the major development countries, including the US and Europe.

"If the major developed economies revive or start the process of recovery, India has the resilience to take advantage of it," he said.

The finance minister said that for the economy to recover, it has to be demonstrated that Parliament and other institutions can function without disturbance.

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He expressed disappointment over frequent disruptions in Parliament. "Let us not institutionalise instability in Parliament", he said, adding coalition governments have become stable since 2000.

Against the backdrop of difficult economic situation, he said political parties have to demonstrate that Parliament and other institutions function and it will have its impact on the government and confidence will return in the economy.

"No finance minister will find it comfortable when rupee declines, when inflation is perilously close to double digit, slowdown of growth. The messages will have to be conveyed collectively. Once Parliament starts functioning, inspire confidence in minds of people," he told the Rajya Sabha.

On its part, he said, "The government will not be found lacking in building consensus on broad economic policies."

- with inputs from agencies