Growth on track, reforms to take it back to 9%: FM

Growth on track, reforms to take it back to 9%: FM
The Economic Times, August 26, 2009, Page 1

At a power gathering of 100 top CEOs and policymakers, Pranab Mukherjee confirms that green shoots have indeed sprouted across industry & Q2 will likely bear more fruit

‘Govt Borrowings Won’t Push Up Interest Rates’

Team ET

WHEN the big guns of business and economy sit down for a power breakfast, what do they munch on? A platter of issues—from India’s growth gumption to public-private partnership with some reform relish on the side.

Finance minister Pranab Mukherjee joined a distinguished panel, 100 CEOs, senior bureaucrats and policymakers on Tuesday to thrash out ‘Mission 2010: The Reform Road Map’. Driving the debate was the question—will the government indeed step on the gas? And will the growth count hold up? Both Mr Mukherjee and C Rangarajan, chief of the Prime Minister‘s Economic Advisory Council, pegged the GDP growth for this fiscal at 6-6.5%. That too after factoring in the drought damage.

Mr Mukherjee told the packed gathering that reforms would continue “in right earnest” to get the economy back to its 9% clip. The good news, he said, was the green shoots in industry with basic goods, intermediates and consumer durables doing better in the first quarter.

Mr Rangarajan, a former Reserve Bank of India governor, said growth should pick up speed to hit 7-8% next fiscal. To accelerate to 9%, though, it was vital to boost domestic consumption, he added.

Brainstorming with Mr Mukherjee and Mr Rangarajan were three CEOs representing India’s bellwether segments—SBI chairman OP Bhatt, Genpact president and CEO Pramod Bhasin, and Future Group CEO Kishore Biyani. The event, hosted by ET, was sponsored by MCX-SX.

But, for the audience, the sweetest music was the FM’s assurance on government borrowings. Mr Mukherjee made it clear that public spending won’t push interest rates higher. Nor would the government’s huge debt appetite leave private industry high and dry. But do Indian banks have a pool big enough for the party?

Mr Bhatt said banks would have to raise more capital, especially tier-1 variety, to keep up with India’s growth drive. “Indian banks are just above well-capitalised. But they should have more capital at their disposal,” he added.