PM beats stimulus retreat... But To Keep Reforms Offensive Going

PM beats stimulus retreat
... But To Keep Reforms Offensive Going
The Economic Times, November 9, 2009, Page 1

Our Bureau NEW DELHI

THE government will start rolling back from next year the stimulus measures it announced to boost demand after the global economic downturn started affecting growth in the world’s fastest growing economy after China, just as it will give momentum to the stalled reforms in the financial sector.

“There are clear signals of an upturn in the economy... We resorted to a significant stimulus and we will take appropriate action next year to wind this down,” Prime Minister Manmohan Singh said in his keynote address at the India Economic Summit on Sunday.

The prime minister also reiterated the government’s resolve to push ahead with reforms, indicating that the global crisis is unlikely to derail the process of opening up of financial markets.

Mr Singh said the broad agenda for reform was driven by the thinking that the country’s financial system should be able to provide the finance needed for infrastructure development.

“We need to develop a longterm debt market and deepen the corporate bond market. This, in turn, calls for strong insurance and pensions sub-sectors,” he said, adding that government will strive to build political consensus needed for legislative changes in these areas.

The United Progressive Alliance government in its previous term could not effect reforms such as further opening up of the insurance sector and dilution of its stakes in public sector firms to its liking due to pressure from its Left allies. The government in its second term looks more confident to carry out its plans on the reforms front as it no longer needs the Left’s support.

“All these issues will be addressed through gradual but steady progress in financial sector reforms to make the sector more competitive...,” Mr Singh said.

The PM’s statement on stimulus comes even as the G-20 finance ministers on Saturday resolved in Scotland to continue with stimulus measures as they found the current recovery uneven and “dependent on policy support”.

MEASURES ON HIS MIND

THE PM THINKS INDIA NEEDS TO:

Develop long-term debt markets, Deepen corporate bond markets, Strengthen insurance and pensions sectors, Improve futures markets for better price discovery and regulation And accelerate the sale of stakes in state-run companies

GROWTH FORECAST

In the PM’s eyes, growth in the next fiscal, assuming a normal monsoon season, is expected to be over 7% compared to a 6.5% forecast for 2009-10.