India, “aspiring to do better in an adverse” environment, is at the world’s centre stage more than ever before, Finance Minister Arun Jaitley has said but cautioned that by its own yardstick, the country’s current growth rate is not enough.
Jaitley, who is leading the high-power Indian delegation to the annual fall meeting of the International Monetary Fund and the World Bank, said there is a “lot of global buzz” around India.
“More than even before we are at the centre stage. That you would have to admit. But, I would put a caveat. India has become far more aspirational than ever before. So compared to the rest of the world, we are doing much better. Compared to our own yardstick, we feel, this is not enough,” Jaitley told Indian reporters at a news conference here.
“We can do still better, which in a sense is not a bad thing to happen. To be restless, to be impatient is a sign of wanting to do better.”For the rest of the world whereas we aspire to do better in this adverse environment, they consider it extremely impressive. So there is a lot of global buzz around India,” he said.
As per the latest forecast by the IMF and the World Bank, India is projected to grow at 7.6 per cent in the next two years, which makes it the world’s fastest growing emerging economy.
“I think, with the kind of economic activities and investments that we have planned over the next several years it (growth) is not likely to go down,” Jaitley said in response to a question.
And it might have an impact only if unforeseen events do not happen, he said.
“I think with the kind of investments, both domestic and international, that we are getting, a reasonable amount of growth will always be there. If growth returns to the world, then you would probably move up. Structural reforms like GST can only add to that,” Jaitley said.
Noting that the world is moving slowly, the Finance Minister said nobody seems to be sure how long this situation would continue.
There is no specific global response, even though there are generalities to fight the situation.
“In India, we have to learn to live in an environment where the world is going to move slowly. And the world is not going to be very supportive of growth. The global environment is not very supportive of growth,” he said.
Since India is growing much faster, as compared to the rest of the world, it has become natural recipient of a higher level of FDI, he added.”Good monsoon, pay commission, reasonable growth rate,domestic demand including rural demand has picked up,” Jaitley said, adding that structural reforms in India today, in terms of direction and taking decision, are easier than ever before.
Increased expenditure in infrastructure and investment would keep growth growing, he said yesterday.
“Challenges (to India are) - one, an unsupported global environment. Two, in some sector private sector investment has picked up. But that’s not the pattern. Still can do better. And three, public sector banks need to become stronger, get out of the NBA scenario.
“And if the world starts growing faster, growth returns to the world as it did between 2005 and 2008, then of course we can expect higher growth rates. But for India to maintain its present level of growth is possible,” Jaitley said.
GST, he said, has a potential to add to the growth for several reasons.
“It is a more efficient tax. It would make trade easier. It would make services and movement of goods easier. For instance, the average time take in sending goods from one part of the country to the other would eliminate, there would be a tax on tax, in terms of costing also, products would become more efficient.
“Currently on 18th, 19th and 20th (of October), we are going to have meeting of the Council to settle the rates. And for us the target date is April 1. It’s a tough target, we hope to reach the target,” he said.
During his four days stay here, Jaitley had a series of bilateral meetings with his counterparts with key countries, including the US, Britain and China. He also had bilateral talks with finance ministers of Iran and neighbouring countries Bangladesh, Bhutan and Sri lanka.
Economic Affairs Secretary Shantikanta Das said the measures being taken by the government in the last two years have unleashed a lot of possibilities and potentialities into the system.
....warns against risks of low, negative interest rates
India has warned about the risks of low and negative interest rates and “significant loan impairments” in the banking system to the global financial stability and called for “delevaraging” balance sheets to spur growth.
“Disorderly deleveraging of private debt could also impact growth. In order to guard against these risks, policy frameworks would have to be strengthened by accumulating buffers and deleveraging balance sheets,” Finance Minister Arun Jaitley said at the annual fall meeting of the IMF and the World Bank.
“Gains from product and labour market reforms and strengthening of risk management practices to address balance sheet vulnerabilities would be helpful in further enhancing resilience,” he said.
In his address, Jaitley said global financial stability appears to have improved with easing external financing conditions and some recovery in commodity prices.
“However, risks to global financial stability persist because of low and negative interest rates, overhang of private debt and significant loan impairments in the banking system,” he said.
Warning that growing populism and isolationism could lead to further deterioration of global trade, he advocated for multilateral efforts to boost trade to support global growth.
“The emerging market and developing economies (EMDEs) as a whole have performed better than the advanced economies, with India registering robust growth. However, the outlook in the EMDEs remains uneven and generally weaker than in the past due to challenging macroeconomic conditions arising from weak global demand and difficulties faced in wake of adjusting to lower commodity revenues,” he said.
According to the minister, prolonged accommodative monetary policies in advanced economies will have serious implications for the EMDEs, including resultant spillovers.
There are also concerns that normalisation of the US monetary policy could have adverse consequences for global financial market volatility and capital flows to EMDEs.
Central banks in major advanced economies should be mindful of financial stability risks arising out of monetary policy normalisation, he saidJaitley said the entrenchment of risks to the globalfinancial and economic stability has implications for the operations of the IMF and the World Bank, particularly in terms of increasing the likelihood of larger demands on their resources.