India's slowdown temporary, government taking corrective action: PM

NEW DELHI: Amid speculation over early elections and his candidature for a third successive term at the helm, Prime Minister Manmohan Singh has emphasised that the slowing of economic growth is temporary and the prevailing pessimism is unwarranted. Blaming global economic woes for India’s sharply reduced rate of GDP growth, Singh said the economy had grown at an average of 8% during the last 10 years and momentum of that kind was not easily derailed. “If the business mood was unduly optimistic in 2007, I think it is unduly pessimistic today. This needs correction,” he told business leaders at a meeting of the Confederation of Indian Industry. “A corrective strategy must be based on a correct analysis of the problem.


Our growth has slowed to 5%, which is clearly disappointing. But this is not a permanent reduction in our longerterm growth potential. As I have said, our economy grew at 8% over the past 10 years. If we go back to 15 years, the average was also 7.5%. This kind of dynamism doesn’t disappear suddenly, and we must prove the prophets of gloom wrong,” Singh said.

The prime minister said while foreign investment rules had been eased for multibrand retail and civil aviation, the government was looking at a comprehensive review of the FDI policy.

Singh’s prognosis that the downturn was temporary comes at a time bad news from various macroeconomic indicators continues to pour in.

The principal Opposition party, Bharatiya Janata Party, has attacked his government for the economy’s woes.

“Part of the problem is due to the global slowdown, which has affected all countries. The world, which recovered well from the 2008 financial crisis, is stumbling badly over the second crisis, provoked by the sovereign debt problems of the Euro zone,” he said. The prime minister pointed out that India was hardly alone in slumping into a lower growth trajectory. “Growth is negative in the Euro zone and zero in Japan. I have just returned from the BRICS Summit. Brazil is growing at the rate of 1.5%, South Africa at 2.6% and Russia at 3.7%. China has done much better at 7.5%, but this is much lower than the rate at which it was growing earlier.”

It was now time, as other countries were doing, to roll back the fiscal stimulus programme that was introduced in the wake of the financial crisis of 2008, Singh said, adding that this was what the finance minister had started to do with the budget. The government would do everything possible to reduce fiscal deficit by half-apercentage point (as a percentage of GDP) each year till 2016-17, he said.