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PM Pledges To Alter Policies For Faster Growth

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The UPA government is going all out with reforms agenda and after the 13 December push and the finance minister talking about the need for a bitter medicine, on 15 December, it was the Prime Minister's turn to promise to alter the policy environment to accelerate economic growth. Prime Minister Manmohan Singh pledged to address concerns on GAAR and taxation of the IT sector along with giving high priority to finalisation of the Direct Taxes Code and Goods and Services Tax.

At the same time, he also called for need to address the issues of under pricing of electricity and petroleum products to cut down the subsidy bill.

"We will speed up the disinvestment process, which will also revive our equity markets," Singh told a gathering of industry representatives at the AGM of Ficci. However, he did not give details of a new timetable for the sales, which is due to include energy exploration major Oil India.

Singh said a year or two of excessive pessimism at home has hurt the growth process.

"But, I stand before you to reassure you that our Government is committed to doing everything that is possible to alter the policy environment, to accelerate economic growth and to make the growth process socially and regionally more inclusive," he told the industry captains.

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Singh said the government decisions on FDI in multi-brand retail, civil aviation and broadcasting and the bills on liberalising foreign investment limits in banking and insurance are based on sound economic logic to insulate the country from persistent global economic slowdown.

"I am afraid that those who oppose these moves are either ignorant of global realities or are constrained by out-dated ideologies," he said, in an apparent reference to strong opposition from several political parties to reforms.

Singh said the steps the government has taken recently were only the beginning of a process to revive the economy and take it back to its trend growth rate of 8 to 9 per cent.

"We need to complete the exercise that was begun on GAAR and taxation of the IT sector. The day before yesterday, the Cabinet has approved the constitution of a Cabinet Committee on Investment.

"This would help in the issue of clearances for major projects in a time bound manner. We will speed up the disinvestment process which will also revive our equity markets," he said.

The Prime Minister said the government was bringing greater clarity on the FDI policy in the pharma sector. Besides, the Railways is working on a Rail Tariff Authority "which will make fare setting a more rational exercise".

He said the government has already put in place a package for reviving Discoms contingent on better performance.

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"The Direct Tax Code and the Goods and Services Tax Bills are high on our priority. The Land Acquisition Bill recently approved by our Cabinet with all the misgivings (expressed by the industry) will soon usher in a more fair and transparent regime for land acquisition," Singh added.

He said some of the decisions government took were politically difficult and the "naysayers and the cynics have tried to halt us in our tracks".

"But we had the courage of our conviction and the interests of our people at heart," he said. Referring to subsidies, Singh said last year the central government's fiscal deficit touched a high of 5.9 per cent of the GDP.

"This was clearly unsustainable," he said, adding, Finance Minister P Chidambaram has come out with a roadmap to reduce it to 5.3 per cent this year and to 3 per cent by 2016-17.

He said the government's action in correcting distortions in energy pricing, reducing diesel and LPG
subsidies, was aimed to achieve this objective.

On recent decisions of cutting subsidies on diesel and LPG cylinders, Singh said subsidies on oil alone are more than what the government spends on health and education put together.

"We need to address these issues even as we ensure that the poor and the vulnerable are effectively protected," he said.

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Singh said the government will do its best to promote Indian enterprise and ensure the well-being of all Indians, working classes and other segments of the society.

Setting The Deficit Bogey To Rest
Global ratings agencies have repeatedly warned India that it faces a credit downgrade if it does not tackle a high debt burden and the fiscal deficit, which is the largest among major emerging economies.

Last year, the deficit was 5.8 per cent of gross domestic product, which Singh said was "clearly unsustainable". He reiterated the official target of reducing it to 5.3 per cent this year.

"The government is serious about moving in this direction," Singh said.

Raghuram Rajan, the government's chief economic adviser, said that reining in the deficit was essential to attract more investment.

"Clearly a fiscal path that is credible is the next important step so that we retake the confidence of our investors," Rajan said, at the same event. He said he hoped increased buoyancy in the stock market would prompt businesses to start investing more.

"Business is sitting on a lot of cash, if they start investing some of that, the momentum starts picking up."

Recent reforms have helped Sensex rally strongly and it is expected to end 2012 up by about 25 per cent,  despite the slow economy, stubbornly high inflation, and a record current account deficit.