Union Finance Minister P Chidambaram said here on Thursday that signs of growth recovery ("green shoots") were visible in some sectors and urged investors to be patient and stay invested.
Addressing an investors' conference, he assured maintenance of fiscal discipline despite being in an election year. According to his ministry, the external sector is seeing a turnaround. Export growth is touching double-digit percentages and the fear that the country will export less this financial year than the previous one has vanished.
Chidambaram said he also expected to better Reserve Bank of India Governor Raghuram Rajan's target, of cutting the current account gap to $56 billion.
"If I may share a secret, I'm going to try to do better than $56 bn," he said.
The twin swap windows earlier opened by RBI to attract inflows has already swelled the foreign exchange reserve kitty by $18 bn and the minister expects the number to go up to $25 bn by the end of the month, till when the window is open.
"Our exports will do well at the end of the year. We see green shoots in some import compression that we had tried; for example, gold. We have deliberately compressed the import of gold. This has helped us to contain the trade deficit, as well as the estimated current account deficit," said Chidambaram.
He also expressed satisfaction at the growth of core industries and that factory output showed an upward trend, though still below the desired level. "Core industries did well last month by registering eight per cent growth. That is a very encouraging sign. In core industries, power is doing well. Although core industries have grown eight per cent, the IIP (Index of Industrial Production) has only moved up two per cent. But even that is a movement upward. It is no way near to where we want the IIP to be but it is trending upward. So, there are some green shoots in industry," he said.
Chidambaram said the mining sector was dragging down the IIP but that was due to a variety of reasons, one being the ban on export of iron ore.
Having earlier asked banks to take initiatives to get stalled projects moving, he said the progress till date was satisfactory. The Cabinet Committee on Investment had also unblocked 99 projects with a total cost of Rs 3.5 lakh crore. "Disbursement has been started by banks, disbursement has started... implementation has started. We may not see the results immediately. Bankers have told me they are beginning to receive enquires for large projects," he said.
He added a healthy trend had been noticed in foreign investment, particularly in foreign direct investment (FDI), with telecom, aviation and pharmaceuticals seeing investor interest. "In pharmaceuticals, we have a huge number of proposals. In aviation, we have three major proposals - Jet-Etihad, Tata-AirAsia and Tata-Singapore Airlines. I think there will be at least one more or maybe two more proposals," he said.
"Foreign investment has been very robust, FDI has been positive, FII (foreign institutional investment) at the moment is negative...cumulative FII in the current year is negative but we believe that by the end of the year, FII will be net-zero or net-positive. So, FII and FDI put together is expected to be positive by the end of the year," the minister said.
However, he also said high inflation was a problem, largely driven by high food prices. And, there was no quick solution.
"RBI has a mandate. The mandate is to control inflation without killing growth. Different central banks have different mandates...Just as you know, monetary policy does not have impact on food inflation. I am sure the governor also knows it," he said. The central bank raised the repo rate in September and October by 25 basis points each, to fight inflation.
On the government's part, he assured the fiscal deficit would be contained within 4.8 per cent of gross domestic product this year. "Going forward, we have to continue to maintain fiscal discipline. I know there are questions - can you do that in an election year? Fortunately, elections are not in this financial year; they are in the next financial year. So, mark my words, I will maintain fiscal discipline. We will end the (financial) year strictly adhering to the targets that I have set for myself," he said.