JOIN USPrime Minister Manmohan Singh on Saturday expressed concern over the slowing economic growth, rising inflation, increasing fiscal deficit and corruption, but said the challenges can be curbed through a concerted effort by the government and Opposition.
“The year that has just ended was a very difficult year for the world. Economic crises, socio-economic tensions, political upheavals in many developing countries. We in India had our share of problems. The economy slowed down and inflation edged up. Concern about corruption moved to the centre stage,” he said in his New Year massage to the nation.
The prime minister’s remarks assume significance in the wake of a slowdown in India’s economy to a two-year low of 6.9 per cent in the second quarter. The uncertain economic environment in other industrialised countries coupled with India’s macroeconomic problems also forced the government to cut 2011-12 economic growth to 7.5 per cent from a budgeted 9 per cent.
His concerns also emanated from the fact that inflation remained as high as above 9 per cent for most part of the year. This was probably the first time after the mid-nineties that inflation was above 9 per cent for entire year. The situation prompted the Reserve Bank of India to follow a tighten monetary policy, which impacted the economic growth further.
Singh said India needed to ensure that its rapid economic growth was accompanied by adequate job creation. To achieve this, it was imperative to curb the slow down in the economy, build infrastructure and usher in reforms that could trigger rapid industrialisation.
He also expressed concern at India’s fiscal deficit situation, which has worsened in the past three years due to large expenditures that the government resorted to in order to minimise the impact of global economic slowdown of 2008. He, however, said that India has run out of fiscal space and must once again begin the process of fiscal consolidation. The most important step for restoring fiscal stability in the medium term is the Goods and Services Tax. “This would modernise our indirect tax system, increase economic efficiency and also increase total revenues,” he said.
Another important step was the phased reduction in subsidies. “Some subsidies, such as food subsidies, are justifiable on social grounds and are expected to expand once the Food Security Bill becomes operational,” Singh said.