|Footage shows Singh speaking in the Lok Sabha on Thursday. (PTI)
New Delhi, Aug. 29: Prime Minister Manmohan Singh today conceded that he could not deny “some domestic factors” were also responsible for the “difficult” economic situation.
“It cannot be denied the country is faced with a difficult economic situation,” Singh told the Rajya Sabha in response to questions from leader of the Opposition Arun Jaitley on the battered rupee.
“There are several causes (for the economic woes). I do not deny some domestic factors too are responsible,” the Prime Minister added.
Promising to make a fuller statement on Friday, the Prime Minister cited the US monetary draw-down and tensions in Syria and its “inevitable consequences on oil prices”.
His colleague and lieutenant, finance minister P. Chidambaram, had earlier this week partly blamed a series of stimulus measures taken by Pranab Mukherjee as finance minister.
As Prime Minister, Singh had not blocked Mukherjee’s spending on public programmes, including building roads and ports and giving tax breaks to industry reeling from depressed demand at an estimated cost of Rs 181,000 crore.
However, many of the Prime Minister’s advisers, including economist Parthasarathi Shome, had questioned the wisdom of the programme which they felt was potentially inflationary.
Singh’s advisers have since tried to cut the flab and check the fiscal deficit by withdrawing tax sops and reducing fertiliser and fuel subsidies. But on Monday, his government drew charges of undoing that effort by getting the food security bill passed. The bill is expected to cost the exchequer between Rs 90,000 crore and Rs 130,000 crore this year.
However, some economists say, India’s inflationary spiral, which Chidambaram blamed on his predecessor without naming him, is mainly on account of rising food prices.
Such inflation is caused in part by shortage of essentials such as pulses, cooking oil, milk and vegetables. Supply bottlenecks also drive up prices — as in the case of onion that fetches farmers in Nasik Rs 4 a kilo and sells for Rs 80 a kilo in Delhi.
Attempts to open up the food market by scrapping old laws which restrict farm sales to a cabal of “licensed” traders and bringing in big retail have not yielded results as yet.
While critics had blamed much of India’s woes on a perceived “policy paralysis”, the Prime Minister’s Office had identified infrastructure bottlenecks as the main stumbling block.
In June, the Prime Minister presided over a meeting of ministers heading economic berths and a plan was brushed out to spend of Rs 1.15 lakh crore on public-private partnership projects over the next six months. A cabinet committee on infrastructure was also set up to speed up mega-infrastructure projects, many of which were turning into bad loans for the banks which had lent huge sums.
However, officials admit that most of the clearances and plans have remained on paper. To add to the slow pace of implementation of projects, multiple regulatory hurdles have made the Indian economic behemoth walk slower.
Environmental and forest clearances are held responsible for delays in around 75 per cent of India’s infrastructure projects, according to Planning Commission officials.
Chidambaram on Monday listed legal hurdles in the way of the economic recovery, pin-pointing the bottlenecks faced by iron ore and coal mining which faced Supreme Court regulations.
India’s over-dependence on a few items of export and inordinate focus on western markets which were in recession saw its exports dipping marginally in 2012-13, compared with the year before. This is one of the key reasons India’s total earnings of foreign exchange are far below the outgo.
At the same time India has been importing far more than it can afford to. Part of the huge import bill cannot be wished away as the country needs to import some 80 per cent of its crude oil requirements.
However, India also buys copious amounts of gold, coal and electronic goods, some of which it can do without. Indians imported some 950 tonnes of gold last financial year, valued at some $55.7 billion.