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More FDI Reforms, Bank Licences On Anvil: PM

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Seeking to boost investor sentiments, Prime Minister Manmohan Singh on Friday, 19 July, assured the industry that the government will further relax FDI norms and Reserve Bank will soon start granting bank licences.

He expressed the hope that the impact of the reforms will boost economic growth rate in the second half of this year.

"Foreign Direct Investment (FDI) has been liberalised in single brand retail, multi-brand retail, civil aviation and power exchanges. More FDI reforms are on the anvil," he said here at a function.

In big-ticket reforms push, the government on July 16 decided to hike FDI in a sectors like telecom, insurance and defence, to boost the sagging economy.

He also said a new bank licensing policy has been announced and new licences are soon to be awarded.

Read Also: Govt Allows 100% FDI In Telecom, Raises Cap In 12 Sectors
Read Also: Steps To Lower CAD Soon: PM

Admitting the economy was going through a difficult period, Prime Minister Manmohan Singh assured the industry that government will leave no stone unturned to ensure a rebound. "We will leave no stone unturned to ensure that the economy rebounds. I appeal to each one of you not to be overcome by negative sentiment," Singh said while addressing the annual meeting of industry body Assocham.

"Let me begin by stating upfront that we, like most other countries, are going through a difficult period... It (industry) is looking to the government to bring the economy back to a higher growth path. This is a legitimate expectation and is also upper most in our mind," he said.

Citing reform measures undertaken over last one year, the Prime Minister said, sugar has been fully decontrolled and at the same time investment policy for urea has been approved.

He also said railways have corrected their fares for the first time in a decade.

Speaking about GAAR, which has been a subject matter of considerable concern to industry, he said, it has been postponed by two years and there is greater clarity on the rules.

Besides, taxation issues of the IT sector and of development centres have been resolved based on the Rangachary Committee report, he added.

Gas pricing has been corrected to reflect market realities better, he said, adding, procedural improvements have been made in the road sector to improve the economic viability of projects.

"We will persevere with these initiatives and I hope that their impact will be felt in the second half of this year," he said.

Emphasising that public sector investment has been fast- tracked, Singh said, "I have estimated that over Rs 120,000 crore has been invested by major PSUs last year."

On the supply side, he said "we need to push our exports.

The depreciation in the rupee will help. There is a time lag before this benefit will be felt in terms of export volumes, but orders being booked from now on would certainly benefit."

The government is also trying to remove the constraints in the export of iron and other ores which saw a considerable decline during the last one year.

Falling for consecutive two month, exports declined to 4.56 per cent in June.

He also expressed the commitment to bring down the current account deficit by addressing both the demand side and the supply side of the problem.

On the demand side, he said, "We need to reduce the demand for gold and the demand for petroleum products the two biggest components of our trade deficit."

The government has taken measures to control the demand for gold and they have had some effect.

"Gold imports declined sharply in June, and I hope they will stay at normal levels from now on," he said.

On petroleum products, the Prime Minister said "we began a process of correcting the prices of petroleum products last year. The gradual correction that was taking place in diesel prices had reduced the gap in under-recoveries from almost Rs 13 per litre to less than Rs 2 per litre."

Unfortunately, some of this has been undone by the depreciation of the rupee, he said, adding: "we too experienced a significant depreciation in the exchange value of the rupee. In our case, it was perhaps exacerbated by the fact that our CAD in the balance of payment had increased to 4.7 percent of GDP in 2012-13."

However, he said, the policy of adjusting prices to progressively eliminate under-recoveries remains in place.


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