FM pins hope on 6.2-7.4% growth in FY05

NEW DELHI: Finance Minister P Chidambaram today indicated delayed monsoons could impact economic growth but said the UPA government was committed to continue reforms to ensure 6.2-7.4 per cent GDP growth this fiscal.

"I can''t comment on monsoons as it is not under my control. I pray for rains and I request you to pray also... A GDP growth of 6.2-7.4 per cent has been projected by economic think-tanks. Even this will be quite high on the back of 8.2 per cent growth of last fiscal," he said at the CNBC ''investor camp'' here.

Referring to the Budget, he said "UPA has a complex electoral mandate, a mandate for agriculture and rural sector... The mandate is also to continue reforms to make Indian economy stronger, competitive and take on the world."

Asserting that Budget took into account needs of poor, children who drop out of schools, senior citizens, savers and above all farmers, he said "it is my duty as Finance Minister of India to interpret the mandate and fulfil it."

While providing more resources for development, he said government was committed towards bringing down fiscal deficit, which was a "historical baggage", to a manageable level of 1.5 per cent of GDP and wiping out revenue deficit by 2008.

"This means, there should be greater tax compliance... If compliance improves, Income Tax rates could be brought down," he said.

On disinvestment, he said an overwhelming majority of India does not believe in "deconstructing" Public Sector Undertakings. "As long as PSUs continue to make profits, they should be allowed to function as PSUs," he said.

"The CMP binds me to classify PSUs in three categories -- Navaratna, profit-making and chronically sick -- and each will be dealt with in a different manner," Chidambaram said.

At the same, he said India Inc wanted that private sector should be opened up to bring about improvement in management, technology and other skills so that Indian industry could supply goods to the whole world.

"We want the public and private sectors to compete with each other," he said.

Asserting the need for well-developed capital market that would be an "engine of economic growth", he said "we need to deepen and broaden capital market. For this to happen, a large number of investors should participate in the market."

He said a well-developed capital market was required for not only raising additional funds but also for efficient allocation of resources.

"Bureaucratic allocation made in some government offices is less efficient. Therefore, we have to rely on capital market as a principal source of funds and its allocation," Chidambaram said.

Stressing on market reforms, he said "capital market will punish bad governance, bad behavior and even arrogance. Proper safeguards should also be in place so that foreign capital flows could be funneled in."

Pointing to "metamorphosis" that Indian capital market has undergone in the last few years, he said "today daily trading volumes at NSE rank only after NYSE and Nasdaq."

He, however, warned retail investors should not go by rumours from ineligible market participants. Shareholder activism would ensure market efficiency and keep the regulator on its toes, he added.