Prime Minister Manmohan Singh on Friday said the government will now have to undertake more difficult reforms, including reduction of subsidy and implementing GST, to put economy back on the path of stable, sustainable growth.
"The easy reforms of the past have been done. We have the more difficult reforms to do such as the reduction of subsidy, the insurance and pension sector reform, eliminating bureaucratic red tape and implementing Goods and Services Tax (GST)," Singh said while addressing Parliament.
Reaching out to opposition and asking them to forge consensus on these difficult reforms, he said: "these (difficult reforms) are not low hanging fruits and they need active political consensus ...
"I urge political parties to move towards the same and join in the government's effort to put economy back on the path of stable, sustainable growth."
The UPA government has been pursuing the principal opposition party BJP to get through the hike in foreign direct investment (FDI) in the insurance sector, since 2008.
In the insurance sector, the government proposes to increase the FDI cap to 49 per cent from 26 per cent, which the BJP opposes. The main opposition party is also not in favour of raising the FDI limit in the pension sector to 49 per cent.
The Centre has been engaged with states to bring them on board for introduction of new indirect tax regime, GST. The Constitutional Amendment Bill was introduced in Parliament in 2010.
In order to reduce subsidy outgo, the government has taken several initiatives, including partially deregulating diesel prices, allowing Oil companies to fix petrol prices and also capping domestic subsidised LPG cylinder at 9 per family a year.
Besides, to attract foreign funds, it has also hiked FDI limits in various sectors including retail, aviation, telecom, power exchanges, petroleum and natural gas sectors.
Pitching for more reforms, the Prime Minister said easy reforms of the past have been done but the difficult ones remain.
"We have the more difficult reforms to do such as reduction of subsidies, insurance and pension sector reforms, eliminating bureaucratic red tape and implementing Goods and Services Tax," he said.
"These are not low hanging fruit and need political consensus... We need to forge consensus on such vital issues. I urge political parties to work towards this end and to join in the government's efforts to put the economy back on the path of stable and sustainable growth," Singh said.
The prime minister attributed the sudden and sharp depreciation in rupee to various domestic and global factors like high current account deficit (CAD), US Federal Reserve plans to taper quantitative easing measures and tensions in Syria.
"... the rupee has been especially hit because of our large CAD and some other domestic factors. We intend to act to reduce the CAD and improve the economy," Singh said.
The deterioration in CAD, he said, has been mainly on account of huge import of gold, higher cost of crude oil imports and recently of coal.
Moreover, Singh said that exports have been further hit by collapse in iron ore shipments making "our CAD unsustainably large".
“Clearly we need to reduce our appetite for gold, economise the use of petroleum products and take steps to increase our exports," the Prime Minister said, adding the government will take all possible steps to bring down CAD below $70 billion this fiscal.
The prime minister said the medium term objective of the government will be to reduce CAD to 2.5 per cent of GDP and the government will make all efforts to maintain "a macro economic framework friendly to foreign capital inflows to enable orderly financing of the current account deficit".