Policy logjam: It takes 'courage and risks' to revive economy, says PM Manmohan Singh

NEW DELHI: After biting the bullet on big-bang crucial reforms including hike in diesel prices, Prime Minister Manmohan Singh has said it will take “courage and some risks” to achieve strong inclusive growth and warned that a “policy log-jam” scenario could push the growth down to 5%.

Singh justified the hike in diesel prices and the capping of LPG, saying that rational energy pricing was critical. The full Planning Commission meeting chaired by Singh approved scaling down of the growth projection to 8.2% during the plan period.

It also outlined three economic scenarios depending on the level of policy action and implementation—strong inclusive growth, insufficient action and policy logjam.

“I believe that we can make scenario one (strong inclusive growth backed with policy actions) possible. It will take courage and some risks but it should be our endeavour to ensure that it materialises. The country deserves no less,” Singh said.

His statement comes even as the opposition parties, including the Left and the BJP and the United Progressive Alliance government’s key allies, have escalated protests against increase in diesel prices and FDI in multi-brand retail.

Singh said to achieve the target of 8.2% growth there is need to revive investment in the economy and “investment environment is therefore critical”. He asserted that the country needed to bring down its high fiscal deficit.

“Our fiscal deficit is too high and is attracting adverse comment from analysts. It must be brought down over the medium term to release domestic resources for productive deployment in the economy,” he said. Singh said the current account deficit pegged at 2.9% of the GDP in the 12th Plan could be financed by attracting investments.

“This (CAD) must be financed mainly through foreign direct investment (FDI) and foreign institutional investment (FII) flows so that reliance on external debt is limited. I believe we can attract the financing we need provided out fiscal deficit is seen to be coming under control and the growth momentum is regained,” he said.

Later, Planning Commission deputy chairman Montek Singh Ahluwalia said the plan would be taken soon to the cabinet for approval after incorporating suggestions given by various ministers at the meeting. It will placed before the National Development Council (NDC), the apex decision-making body, for final approval.

PC For ‘New Authority’

P Chidambaram has suggested creation a cabinet-level authority to take final decision on major investment proposals, as against the current rules that level the decision to one or more ministries.

Speaking at the full plan meeting on Friday that approved the 12th five-year plan, he said because of the involvement of many ministries a “truly ‘final’ decision does not emerge for many years”.

He suggested a National Investment Board chaired by the PM to clear proposals/projects where the investment is above a certain threshold, indicatively placed at Rs 1,000 crore.