The Prime Minister’s Economic Advisory Council (PMEAC) today blamed the government for having “lost time” in getting its act together despite the combined momentum of stability after the May 2009 general election and the successful navigation through the global crisis.
Presenting the Economic Outlook for 2011-12, the C Rangarajan-chaired council said overconfidence in both the government and business, disinclination to roll back fiscal and monetary stimulus quickly, corruption-related controversies in the last one year and loss of focus on policy initiatives marred the country’s return to the path of high rate of asset creation and economic growth.
“Some of the momentum has gone out of the economy. It is true many economies are still embroiled in hard conditions, but that is not good enough reason why we have not been able so far to do better than we have,” the report said reflecting on the past two years. Looking ahead, it said: “It is absolutely imperative that active measures to improve the investment climate be taken.”
According to the PM’s council, rolling out physical infrastructure, pushing through reforms and improving efficiency in public expenditure in the social sector are imperatives to be energetically focused on.
It, however, noted that part of the reason the government perhaps lost focus and found itself on the backfoot was the spiralling inflation and apprehensions brought home by the exceptional drought of 2009.
Estimating the economy to grow 8.2 per cent this year, the PMEAC said while foreign direct investment is expected to more than double to $18 billion from $7.1 billion last year, FII inflows are expected to drop by over 50 per cent to $14 billion for 2011-12 compared with $30 billion the previous year.
“When domestic investor confidence was uncertain, it is likely foreign investors remain doubly cautious,” Saumitra Chaudhuri, member, PMEAC and also the Plan panel, said. Last year, India witnessed a larger number of IPOs and follow-on offers in the market which attracted almost 30 per cent of the portfolio investment.
The PM council said that in its structured interaction with India Inc, businesses singled out bottlenecks in power, roads and the ports sector, inadequacy of coal for power projects, delays in forest and environmental clearances, skilled labour shortage and funding gaps with banks reaching sectoral exposure caps, as the key structural impediments to growth. Also, “the uncertainty arising from political developments has had a very negative impact on business confidence and investment outlook”, the council said.
It asked the government to speed up clearances to projects that have got stuck and make a clear announcement of projects it intends to take in the balance of the year. It suggested bringing down inflation as quickly as possible through policy reforms and improving the regulatory and governance framework expediting implementation of the goods and services tax (GST).
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