Aiming at double-digit inclusive growth in the economy in coming years, Finance Minister P Chidambaram on Tuesday expressed the hope of completing financial sector reforms by the first half of 2005-06.
Addressing the Confederation of Indian Industry annual session, he also indicated to further liberalisation of policies to attract more foreign investments (foreign direct investment and foreign institutional investor funds), promote external commercial borrowings, service exports and tourism.
Expressing concern over high public debt, Chidambaram said government aims to wipe out revenue deficit by 2008-09 by better expenditure control and increasing tax revenues.
Stressing on speedy reforms, he said: "First thing we have to do is to complete the agenda of financial sector reforms. Policies are still being made in financial sector -- in banking, insurance, pension and capital market," he said.
"A comprehensive policy on financial sector should be made by the first half of this fiscal so that all uncertainties are put to rest," he added.
He also pitched for early passage of legislations on Women's Reservation and Rural Employment Guarantee scheme. Responding to India Inc's demand for sustaining high growth, he said: "Our aim is not to attain inclusive growth with 3.5 per cent GDP growth. Our aim is to achieve inclusive growth with double digit growth."
While manufacturing and services sectors have to grow by over 10 per cent, he said agriculture needs to grow by 4 per cent in order to ensure double digit economic growth.
India's GDP is expected to grow by 6.9 per cent in 2004-05 as against 8.5 per cent in the previous fiscal.
"What hinders growth in agriculture is poor investment, poor policies and markets," he said referring to Prime Minister Manmohan Singh's announcement of Rs 170,000 crore (Rs 1,700 billion) investment in rural infrastructure as part of 'Bharat Nirman' or nation building.
The finance minister also favoured introduction of contract farming and diversification of cropping to produce for international markets while criticising states for not amending the Agriculture Produce Marketing Committee Acts.
Chidambaram listed five major hurdles or deficits that were coming in the way of high growth -- fiscal and revenue deficits, trade deficit, investment and savings deficits, policy deficit and governance deficits.
On fiscal consolidation, he said: "Expenditure control is indeed a way out but the key is to increase revenues. Unless tax revenues go up and the Tax:GDP ratio improves, there is no way of bridging the fiscal and revenue deficits."
He said India's tax rates have been lowered and administration improved to ensure higher collection. The tax structure is also congenial to boost both revenue and savings in the country.
Pointing to the deficit in investment and savings rates, he said the latter has to increase from the present 28.1 per cent of GDP along with investment rate now at 26.6 per cent.
"The government must stop to be a profligate dissaver," he said, adding that savings of the private and the household sectors must also improve.
To ensure that India's trade deficit, now at $30 billion, does not become an 'albatross' on the economy, he said, "We have to keep our doors open to FDI, ECBs, remittances, service exports and tourism earnings."
While lauding the export community on their performance, Chidambaram said: "With our forex reserves we can manage the trade deficit. But our exports must grow faster."
The trade deficit must be matched by higher inflows through remittances and service exports, he said.
Chidambaram admitted that policymaking in India does not translate into implementation very fast.
"Policies are always in the making in India. We have not unmade any policy but we are always in the process of making policies."
He asked industry captains to assist government in bringing consensus among politicians, states, trade and banking sectors to hasten reforms.
Pointing to governance deficit, he said all the policies are good if there is good governance, politicians do their duty with dedication and bring utmost professionalism.
He invited professionals to work for government for 5-7 years and improve its governance.
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