New Delhi, Mar 23 (IBNS) Union Finance Minister P. Chidambaram on Saturday said that India with its focus on inclusive development and timely interventions has been able to weather the global crisis better than most other countries.
He said: "With liberalization of FDI in certain areas and slew of other steps, we have travelled a considerable distance on the road of economic reforms."
Chidambaram said that the need of the hour is to ensure that these reforms are implemented efficiently so that the anticipated upturn in GDP growth is achieved in as short a time as is practicably possible.
He was speaking after inaugurating the National Editors' Conference here on Saturday.
The two-day conference is being organized by Press Information Bureau (PIB), Delhi.
Chidamabram said that the reforms are on-going process and far reaching changes have been made in the macro-economic and sectoral policies since 1991.
He said that the government has introduced a series of reforms to improve and sustain the investment climate in the country as well as to make growth more inclusive.
"These include liberalisation of FDI in multi brand retail, civil aviation and broadcasting, rationalization of diesel and other petroleum prices including capping subsidized LPG cylinders to consumers," he said.
The FM said that several fiscal and administrative measures to rein in inflation and steps to reduce the fiscal and current account deficits are also being taken.
He said that current account deficient and fiscal deficit are distinct in the sense that both are financed through different sources.
He said that while current account deficit is financed by foreign exchange while fiscal deficit can be financed through domestic savings and earnings.
Chidambaram announced certain measures for ratioinalisation of foreign investments in Government Securities and Corporate Bonds.
In order to encourage greater foreign investment in INR denominated debt instrument and to help develop rupee debt markets, Chidambaram said that the Government will simplify the framework of FII debt limits, the allocation mechanisms of these debt limits and also lay down a plan for enhancement of these debt limits.
The Finance Minister said that the existing debt limits will be merged into following two broad categories - government securities of US$ 25 billion (by merging government securities old and government securities long term), and, corporate bonds of US $ 51 billion dollars (by merging US $ one billion for QFIs, US 25 billion dollars for FIIs and US $ 25 billion for FIIs in long term infra bonds).
He said that because of the room created by unifying categories, the current SEBI auction mechanism allocating debt limits for corporate bonds will be replaced by the 'on tap system' currently in place for infrastructure bonds.
He said that in order to allow large investors to plan their investments, the government will review the foreign investor limit in corporate bonds when 80% of the current limit is taken up.
He said that it will also enhance the limit on government bonds as and when needed, based on utlilisation levels, demand from foreign investors, our macro-economic requirements and a prudent off shore:on shore balance.
To provide a guide to investors, the FM said that the annual enhancement of the Government bond limit will remain within 5% of the gross annual borrowing of the central government excluding buy backs.
Chidambaram said that these changes will be made operational by April 1.
The Finance Minister said the budget proposals of 2013-14 have a number of incentives for Government which include tax deduction of investment allowance for companies making an investment of over Rs. 100 crores in plant and machinery, zero custom duty for plant and machinery for manufacturing electronic semi-conductor wafer fabs and availability of non-tax benefits to micro, small and medium enterprises (MSME) for three years even after they graduate to higher category.
He further said that in an emerging economy like India, rapid economic growth is one of the most important economic objectives. He said that economic growth though important can not be only an end but is also a means to an end.
He said that it allows to generate the resources to achieve more equitable development and a wider distribution of the opportunities, development offers so as to attain higher standards of living for the masses.
"Equally important is the need for effective bridging of regional, social and economic disparities and empowerment of the poor and marginalized, specially women to make the entire development process more inclusive," he said.
The Finance Minister said that the 12th Five Year Plans sub-title "Faster, More Inclusive and Sustainable Growth" puts the growth debate in the right perspective. "The Government's targeted policies for the poor with fewer leakages can help in translating higher outlays into better outcomes especially after implementation of Direct Benefit Transfer System."
Chidambaram said that India has the opportunity to grow at a brisk rate for many more decades.
He said that it is on the brink of a demographic transition with the proportion of working age population between 15 and 59 years likely to add approximately 63.5 million new entrants to the working age group between 2011 and 2016, the bulk of whom will be in the relatively younger and productive age group of 20-35 years.
He said that given that India is one of the youngest large country in the world, human development assumes great economic significance for it as demographic dividend can be reaped only if this young population is healthy, educated and skilled.
He said: "By giving our people the right skills, tools and the right jobs, we can increase the value that they add for many years to come."
Chidambaram said: "By moving excess people out of agriculture to higher productivity sectors such as services and industry, we can have a growth machine that can produce brisk growth for many years, creating higher incomes and improved livelihoods."
"To make all this happen, we need to create more high productivity jobs as well as opportunities in organised manufacturing and in services sectors even while improving productivity in agriculture. No country has become middle income or developed country without a strong manufacturing base," the FM added.
He said that despite the limitations in fiscal space, the programmes aimed at human development have never been allowed to suffer on account of paucity of funds.
He said that this is also evident from the fact that as a proportion of the GDP, expenditure on social services increased from 5.91% in 2007-08 to 6.79% in 2010-11 and further to 7.09% in 2012-13 (BE).
He said that while expenditure on education as a proportion of GDP has increased from 2.59% into 2007-08 to 3.31% in 2012-13 (BE); while on health it has increased from 1.27% in 2007-08 to 1.36% in 2012-13 (BE).
The FM said that the central outlay for health in 12th Five Year Plan has been increased by 200 per cent to Rs. 3,000,18 crore compared to the actual outlay of Rs. 99,491 crore in the 11th Five Year Plan.
In line with the government's commitment to "faster, more inclusive and sustainable growth", the Union Budget 2013-14 has earmarked enhanced resources for all major social schemes, he said.
Chidambaram said that adequate funds have been provided in the budget to every Ministry/Department including for Bharat Nirman programmes.
He said that National Food Security Bill is a promise of the UPA Government. He hoped it will be passed soon by the Parliament.
An amount of Rs. 10,000 crores has been set apart, over and above the normal provision for food subsidy, towards the incremental cost that is likely under the act, he added.
The FM said that we have a collective responsibility to ensure the dignity and safety of women. He said that Criminal Law (Amendment) Bill, 2012 has already been passed by the Lok Sabha and Rajya Sabha.
Chidambaram said that a fund called as 'Nirbhaya Fund' is also set up with the Government contribution of Rs. 1000 crores for providing instant relief to the women victims of atrocities.
The FM said that a number of legislative steps have also been taken by our Government to guarantee rights to people like the Right to Information, Right to Work through the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), the Forest Rights Act and Right to Education among others.
He said that, however, there are also pressing issues like leakages and funds not reaching the targeted beneficiaries.
"We have recently launched Direct Benefit Transfer (DBT) system with the unique ID system Aadhar can help in plugging many of these leakages and ensure that money from Government schemes reaches the right beneficiaries on time and in the full amount through their bank accounts," the minister said.
He said that it will help translate outlays into better outcomes by improving service delivery, accountability and transparency in the governance of various schemes and also accelerate financial inclusion.
He said that we have already made a start in 43 districts in Phase-I and committed to the time bound implementation of the DBT system across the country.
"We have reached a decisive phase of economic rebuilding and today, we as a nation are more confident in dealing with the global challenges posed from time to time," he said.
Chidambaram said that a resurgent India, having earned its place among major economic powers of the world, confidently looks forward to a brighter future.
"We are steadily but surely working on the next generation of reforms." The FM said that the immediate challenge, however, is to consolidate the economy to return to path of higher growth rate while ensuring that gains of growth reach more and more people.