India needs to find a balance between fiscal prudence and spending, and there’s no need to panic, said Finance Minister Arun Jaitley as economic growth slumped to its lowest in three years last month.
The finance minister called for more private investment from local companies and said the government is committed to making India’s banking system healthier.
Here are the highlights:
- Need to find balance between spending and fiscal prudence balance.
- Need healthier banking system and more private investment.
- No need for panic about India's growth. There's a need for analysis and responsive action.
- Government considering options to help export industry after exporters raised issue of refunds under GST.
- Had expected major disruptions, technological glitches during the rollout of GST, that didn't happen.
- Looking at both consolidation and strengthening government-owned banks.
- Would rather have stronger banks merging than weaker banks mergers.
- Once we get a better sense of the universe of bidders, we will determine the terms of sale of Air India.
The transaction advisers for selling stake in indebted Air India will be appointed soon, Jaitley said. The government has worked out all systems in place in a number of meetings with ministers on what to do with the airline and its ancillary businesses, Jaitley added.
Finance Minister Arun JaitleyOnce we realise the universe of bidders and likely response, we’ll settle the terms
Jaitley said that he'd expected "chaos" and "major technology glitches" after the rollout of GST. He was pleasantly surprised that the rollout happened smoothly.
India needs more private invesment, a healthier banking system, coupled with fiscal prudence to bolster the economy, Jaitley said.
Policymakers in India have demonstrated enough will to bring change, he added. "Nobody doubts even big bang reforms from India anymore," he boasted.
Two months are too early to study a pattern emerging from the implementation of the Goods and Services tax, Jaitley said.
He sees significant scope for expansion, and is "quite certain" of significant gains for the states and the Centre. However, Jaitley added that he will keep his fingers crossed for two-three more months before assessing the full impact.
The idea behind demonetisation was to shake up the system and make sure that the anonymous cash, operating outside the system, becomes a part of the system itself, Jaitley said.
No past governments had dared to move on this path and had accepted the shadow economy as an Indian norm, he said. We wanted to shake up the norm and create a new Indian norm, Jaitley added.
Jaitley admitted that the entire push for moving towards a more digital economy was not an easy area to take on.
The desire to improve and implement reform across the country has increased, according to Finance Minister Arun Jaitley.
Jaitley said that the government was faced with an uncertain and unsupportive global environment. However, the government was able to take the economy forward with a steady growth rate, systemic reforms and maintaining realistic fiscal prudence, he added.
Citing the Goods and Services Tax council, where finance ministers mulled over various aspects of a new tax regime to ensure its smooth rollout, Jaitley said that the language and idioms of politics in most states are changing. There is a major fall in corruption too, he added.
India’s Finance Minister Arun Jaitley faces the daunting task of reviving economic growth, after demonetisation and the Goods and Services Tax brought the pace of expansion to its lowest since 2014.
Earlier this week, Jaitley reviewed the state of the economy in multiple meetings with various state finance ministers, and Commerce Minister Suresh Prabhu, Railway Minister Piyush Goyal, and government think tank NITI Aayog’s Rajiv Kumar.
HSBC expects the Indian economy to leapfrog to the third largest in the world by 2020. However, it expects it to happen only with consistency in reforms and more focus on the social sector.
India’s GDP growth slowed to 5.7 percent in the June-ended quarter. The banking system is burdened with mounting bad loans and slow credit growth, keeping private investments at bay and putting the onus of spurring growth on government spending. Fiscal slippage is a concern too with India already reaching 92 percent of it budgeted estimate in July.
The finance minister will speak at the Bloomberg India Economic Forum 2017 in Mumbai today.
Watch my Keynote speech live at the Bloomberg India Economic Forum 2017 at 5 pm, Sept. 22, 2017 https://t.co/WwIboojFNq— Arun Jaitley (@arunjaitley) September 22, 2017
He had said that the government will announce economic measures after consulting with Prime Minister Narendra Modi on the situation.
You can follow Jaitley’s keynote followed by his fireside chat from the event here.
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