Finance Minister Pranab Mukherjee said on Thursday that the economy was expected to revive in the second half of the year on the back of the latest Index of Industrial Production numbers, return of foreign institutional investors to the markets over the last two months and the normal functioning of the credit markets.
Addressing the who's who of India Inc at the Business Standard Awards function, Mukherjee said corporate tax collections were expected to increase in the second half of the year with economic activity picking up. "The cycle of tax reforms will also be completed with the implementation of the Goods and Services Tax from April 2010, with the co-operation of state governments. The direct tax code is also an important part of that," Mukherjee said.
However, the minister said there were some concerns in the form of a deficient monsoon. There were also "initial legitimate concerns" about high government borrowings, budgeted at Rs 4,51,000 crore during the current financial year, elbowing out the credit requirements of the private sector.
"But we have managed it well, with the cooperation of the Reserve Bank of India. So far, the credit requirements of the private sector have not been elbowed out," the finance minister asserted. He pointed out that RBI had taken steps to increase liquidity to the private sector. "I can assure you that there should be no reason for concern, both regarding the availability of credit and also the cost of credit," Mukherjee said.
The finance minister said the fiscal pressure would be reduced in the current year because there would not be any increase in government spending on account of higher wages for public sector employees as there was in the previous year, following implementation of the Sixth Pay Commission recommendations. Besides, the Rs 82,000 crore extraordinary spending incurred because of the fiscal stimulus packages would not recur. "No one can expect that this would be repeated," he said. At the same time, the minister advocated fiscal prudence but without compromising on growth.
The finance minister said there was reason to believe that the environment was improving, going by the robust inflows of foreign direct investment of $121.29 billion since 2001-02. "India has become one of the most attractive FDI destinations," he said.
Mukherjee observed that though the Indian financial system had not been directly impacted by the global financial crisis, some weaknesses in the system had been seen.
Mukherjee, who had attended the BS Awards five years ago in 2004, said the economic backdrop had changed completely since then. The first year of the UPA's first term in government had seen high growth, which then continued for three consecutive years. This time around, however, expectations of all stakeholders had risen and managing high expectations was a challenge, too.
The CEO of the Year award went to Thermax Chairperson Meher Pudumjee. As she was away in the US, the award was received on her behalf by the company's Managing Director & CEO M S Unnikrishnan. While receiving the award, Unnikrishnan said the fact that he was receiving the award even though Anu Aga, Pudumjee's mother, was present, showed the true spirit of Thermax.
Tata Motors was given the award for the Most Innovative Organisation of the Year for its small car Nano. Receiving the award, Tata Motors MD P M Telang said the rest of the world did not believe Chairman Ratan Tata when he said that he would make his Nano dream a reality. "But we didn't accept defeat. It spurred us into doing more," he said. Telang dedicated the award to the hundreds of engineers who had made the world's cheapest car possible.
Receiving the Banker of the Year award, HDFC Bank MD & CEO Aditya Puri sounded an optimistic note, saying that even if the monsoon was below normal, the economy would grow by 5.5-6.5 per cent. "India was seeing growth on a sequential basis and in that sense, we are privileged", he said.
The other award winners were Areva T&D (Star MNC), Power Grid Corporation (Star PSU), Optocircuits (Star SME) and Tractors and Farm Equipment (Star Unlisted). The Car of the Year award was won by Honda Siel for the new Honda City and the Bike of the Year award was bagged by Yamaha Motors for the Yamaha FZ-16.