Worried that the economic slowdown comes with “a decade of jobless growth”, Finance Minister Arun Jaitley on Sunday advocated the need for fiscal discipline to “reduce the fiscal deficit, contain inflation and improve upon our growth rates”.

In his latest blog ‘From Celebrations to Challenge’ — which is also his first after becoming minister — Jaitley blamed the UPA government for passing on an economy whose GDP has grown at sub-5 per cent for two years in a row.

He also pointed out that the mining and quarrying sectors have shown declining growth; the manufacturing sector displayed abysmal performance last year while the negative sentiment has affected trade, hotels and the transportation sectors which are poised for slower growth compared to last year.

“The slowdown in economic growth coupled with high inflationary pressure poses a challenge to the macro economic environment.... India can ill-afford this trend. This has serious social consequences since slowdown comes with a decade of jobless growth,” he said.

“We must move towards an era of fiscal discipline where we can reduce the fiscal deficit, contain inflation and improve upon our growth rates. India must prepare itself for this. We must commit ourselves to this discipline in order to strengthen the Indian economy, which will improve the quality of life of every Indian and pull out the deprived ones from a state of poverty. Short-term discipline till we reverse the present trend will give us long-term benefits,” he observed.

He said that the general elections have revealed that “there was a high level of dissatisfaction with” the UPA, while at the same time, high hopes in the NDA government led by  Narendra Modi. “It is this hope which commands us to pull the country out of the present economic situation,” Jaitley said.

He said that as per CSO estimates released in May, inflation continues to rise with the April figures at 8.9 per cent and tax collections at 10.1 per cent of GDP compared to initial budget estimates of 10.9 per cent.

India’s economic growth stayed below 5 per cent for the second year in a row at 4.7 per cent in 2013-14, mainly due to decline in manufacturing and mining output. Growth remained subdued at 4.6 per cent in the fourth quarter of last year.

Reviving the growth momentum, containing inflation and altering the pattern of growth to facilitate gainful employment are overriding priorities, he acknowledged.

“There is a need to boost domestic low-cost manufacturing and hasten the pace of reforms. Price stability and growth are intertwined but may require a different strategy.

This will involve fiscal rectitude as a combination of monetary and fiscal policy,” he said.
Many key economic reforms including increasing FDI in the insurance sector, implementation of Goods and Services Tax, and the Direct Taxes Code remained in limbo in the last UPA government.

Jaitely’s remarks come two days ahead of the Reserve Bank’s monetary policy review which is widely expected to keep policy rate unchanged in its bid to fight inflation.