The Government’s efforts to revive manufacturing growth in the country has shown signs of a turnaround and Finance Minister Arun Jaitley on Tuesday said the fiscal deficit targets for current year are likely to be met. He also underlined the need for tax reforms and quick decision making to ensure stability in policy regime.
“Even though the revenues have been challenging due to slow manufacturing industry, now, it is turning around and it looks like we will be able to meet our fiscal targets,” Jaitley said. The Government has pegged fiscal deficit target at 4.1 per cent of the GDP for the current year. The Government has realised the significance of the manufacturing industry to the country’s industrial development and is taking necessary steps to increase investment in the sector.
According to a report by Mckinsey and Company, India’s manufacturing sector could touch US$1 trillion by 2025. There is potential for the sector to account for 25-30 per cent of the country’s GDP and create up to 90 million domestic jobs, by 2025. Many foreign investors have decided to invest in the country in the recent past due to low cost of setting up of plants and available manpower.
The Government has an ambitious plan to locally manufacture as many as 181 products India currently imports at a cost of at least US$ 18.1 billion. The move could also help infrastructure sectors such as power, oil and gas, and automobile manufacturing that require large capital expenditure and revive the Rs 1.85 trillion (US$ 29.07 billion) Indian capital goods business.
Jaitley, who is scheduled to present the Budget on February 28, wants a change in tax administration to increase revenues. “There is need for change both in attitude and mindset towards investors’ and assesses. We need to have a non-adversarial tax administration which is both investors’ and assesses’ friendly,” Jaitley added.
With Indian rupee appreciating and better than expected corporate earning numbers, the industry believes that we are in the growth trajectory. “From depressing slowdown in last last two three years, suddenly our growth rates are likely to look up,” Jaitley said.
According to International Monetary Fund (IMF), India’s growth rate will overtake that of China in the next 2-3 years. It has said this crossover will happen in 2016 when the Indian economy will grow at the rate of 6.5 per cent against the 6.3 per cent expected in China. Earlier, the World Bank had said India will overtake the Chinese growth rate in 2017 with 7 per cent against China’s 6.9 per cent.
“Our currency is one of those two global currencies that withstood the might of the US dollar. Most of the global currencies are under pressure,” he further added. On the capital account front, analysts are predicting a surplus for the first time in more than seven years as falling crude oil prices and lesser gold imports would ease the pressure on the country’s trade balances. Nomura in its report, expects the current account balance to swing into a surplus of about 1.5 per cent of gross domestic product for the January to March quarter.
Morgan Stanley estimates that India may finally swing into a minor surplus of 0.3 percent of GDP in 2015. The bank cites the collapse in the price of oil - India’s largest commodity import - and lower gold imports as the two main factors helping the current account balance.
“Brazil faces a challenge, South Africa faces challenge. Europe is still struggling to come out of slowdown. China which has maintained a growth rate of over 9 per cent over 3 decades is looking at new normal,” the Finance Minister said.