New Delhi: With fast improving macro picture, the Indian economy will achieve a growth rate of 5.8 per cent in the current financial year while the fiscal situation is set to improve considerably with the government expected to completely exit subsidy on diesel soon, Finance Secretary Mr Arvind Mayaram said at an ASSOCHAM meeting in New Delhi today.
The Indian economy had grown at 4.7 per cent in the financial year 2014-15. However, the situation is fast improving. “I am confident we will achieve 5.8 per cent in the current financial year as the green shoots of recovery in the economy are surely visible. Besides the Budget has strong growth impulses”, the Finance Secretary said in his interaction with the members of ASSOCHAM Managing Committee, comprising eminent industry leaders here at New Delhi.
Given the subdued global outlook, the Indian economy is doing fairly well as is evident from several key data points such surge in capital goods and “we clearly see expansion in new orders”.
While tensions in Iraq and the unfolding global geo-political situation was not encouraging, Mr Mayaram said, “ we have been lucky on oil. We will be able to exit the diesel subsidy. “With the roll out of the Direct Benefit Transfer (DBT), the subsidy burden on the government is going to come down significantly, he pointed out. The subsidy bill on account of petroleum has been pegged lower at Rs 63,427 crore for the FY’ 15, much lower than Rs 83,998 crore in the previous fiscal, added Finance Secretary.
The Finance Secretary said with these improving numbers, the government should be able to achieve the Fiscal Deficit target of 4.1 per cent of GDP for the current fiscal even though it may appear to be difficult. He allayed concerns whether the assumptions of tax buoyancy of 19 per cent for FY’ 15 was accurate. He said the tax revenue grew by 12 per cent with GDP expansion of 4.7 per cent in FY’ 14. “If growth will go up to 5.8 per cent, 19 per cent is not unprecedented”, he said.
The Finance Secretary said the RBI had stated in its recent credit policy that it would not hold interest rates high any longer than required. “As we see inflation coming down, hope that threshold (of RBI) we will be able achieve soon enough”
Answering a question whether the composite cap of 49 per cent foreign investment (FDI and FII and other categories) was right, the Finance Secretary said, the policy takes into account overseas investment of “any colour or kind” and there would always be some limit. He said the issue is complex and the government is seized of it. But said the policies on foreign investments continue “ to push the boundaries”.
On concerns over the reported figure of 250 tonnes of smuggled gold, Mr Mayaram said it was too big to be true and was not possible in the present day surveillance and the money trail that can be tracked through different laws dealing with money laundering. He made it clear that the dispensation of 80:20 gold imports will continue as it has helped re-exports. “We cannot afford 1000 tonnes of gold import at a bill of USD 55 billion “.
On demand from some ASSOCHAM members for protection to the domestic telecom and electronics items, he said the government can only remove the inverted duty structure but the international commitments on import duty like provided in the ITA cannot be breached.
In his presentation, ASSOCHAM President Mr Rana Kapoor said the overall business confidence has improved in the recent months. However, he expressed the hope that some of the impediments like the Land Acquisition Act would be removed.
He also made a forceful recommendation of getting it back on the drawing board the blueprint of making Mumbai as the international financial hub by declaring it as the Economic Region. Mr Kapoor, noted banker himself, also suggested setting up forex clearance mechanism. Besides the rupee invoicing of international trade should be encouraged.