Vote on Account 2014: Chidambaram's ten point agenda to make India third largest economy

NEW DELHI: In his Vote on Account 2014 speech, Finance Minister P Chidambaram said that the UPA Government has a clear line of sight to the goals that it has set for itself.

"India's economy, in terms of the size of its GDP, is the 11th largest in the world. There are great things in store. There is a well argued view that in the next three decades India's nominal GDP will take the country to the third rank after the US and China," Chidambaram said.

"Just as the fortunes of the developed countries affect the emerging economies today, the fortunes of China and India will, in the future, have a significant impact on the rest of the world. We therefore owe a responsibility not only to ourselves but to the whole world to keep our economy in robust health," he emphasised.

"I have broken down the steps toward those goals into tasks that must be undertaken by the Government of the day. I identify ten such tasks," he said.

1) Fiscal Consolidation: FM highlighted the need to achieve the target of fiscal deficit of 3 per cent of GDP by 2016-17, and remain below that level always.

2) Current Account Deficit: "Since we will run a Current Account Deficit every year for some more years, it can be financed only by foreign investment, whether it is FDI or FII or ECB or any other kind of foreign inflow," FM said.

Hence, the FM said that there is no room for any aversion to foreign investment.

3) Price Stability and Growth: According to Chidambaram, in a developing economy one must accept that when the aim is high growth there will be a moderate level of inflation. "RBI must strike a balance between price stability and growth while formulating monetary policy," he said.

4) Financial Sector Reforms: The recommendations of the Financial Sector Legislative Reforms Commission that require no change in legislation must be implemented immediately and, for the other recommendations, we must draw a timetable for passing legislation, he said.

5) Infrastructure: Chidambaram stressed the need to create new financing structures for long term funds and pooling of investments. "We must rebuild our infrastructure and add a huge quantity of new infrastructure. Every proven model must be adopted and the PPP model must be more widely used."

6) Manufacturing: "We must focus on manufacturing and especially on manufacturing for export. I propose that all taxes, Central and State, that go into an exported product should be waived or rebated. I also propose that there should be a minimum tariff protection so that there is an incentive to manufacture goods in India rather than import them into India," Chidambaram said.

7) Subsidies: Given the limited resources, and the many claims on the resources, FM said that one must choose the subsidies that are absolutely necessary and give them only to the absolutely deserving.

8) Urbanisation: FM was of the opinion that our cities will become ungovernable, and perhaps unliveable, if one does not address the decay in them. "Cities have wealth, cities also create wealth. That wealth should be tapped for resources to rebuild the cities with a new model of governance," he said.

9) Skill Development: Skill development must rank alongside secondary education, university education, total sanitation and universal health care in the priorities of the Government, he said.

10) Sharing responsibility between States and Centre: "States have the fiscal space to bear a reasonable proportion of the financial costs of implementing flagship programmes and must willingly do so, so that the Central Government can allocate more resources for subjects such as defence, railways, national highways and telecommunications that are its exclusive responsibility," Chidambaram said.