| Prime Minister Manmohan Singh in New Delhi on Tuesday. Picture by Rajesh Kumar
New Delhi, March 13: Prime Minister Manmohan Singh today indicated his government’s desire to press ahead with reforms especially in finance, including banks, and labour.
“We need to further deepen and widen ... reform of our banking and financial system ... (and) we need to develop a long-term debt market,” Singh said at a round table on India.
The Prime Minister, considered the architect of India’s growth story, stressed the need for reforms in labour. Singh, however, admitted that too much is read into the archaic labour laws given that 90 per cent of the workforce is in the unorganised sector, which is unencumbered by restrictive regulations.
Besides labour, the Congress-led government is trying to usher in changes in banking by opening up Indian banks to foreign direct investment (FDI) and promoting mergers and consolidations in PSU banks. Also on the agenda are opening up of the pension sector and a hike in FDI in insurance.
However, its intentions have been thwarted by the Left and its own fears of electoral consequences of the moves.
The Prime Minister seemed to have acknowledged these problems when he spoke of the need to calibrate the changes to help domestic companies and “our working people” to adjust to the new realities.
Singh, nonetheless, averred that there was a consensus on reforms barring a few issues. “It is indeed quite remarkable that in the last 16 years, the fiscal and economic policies have largely followed a similar line,” he said.
Allaying fears of overheating, Singh said he has faith in the ability of the Reserve Bank and other departments concerned of the government to make growth a sustainable and stable exercise.
He said the country’s savings and investment rates are expected to rise further, adding that the savings rate at 32 per cent and the investment rate at 34 per cent can both go up by another 5 percentage points. “I have reason to believe that they will rise further by another 5 percentage points in the years to come.”
He said the very process of shift from farming to industry will add a percentage point to growth. “Many economists believe we have moved to a new growth trajectory.”
The Prime Minister also said his government was committed to fiscal consolidation. Singh promised to provide an environment conducive to foreign fund inflows, particularly in infrastructure, which needs $300 billion of investments.