NEW DELHI — India’s new pro-market finance minister on Monday pledged to takes steps to restore foreign investors’ faith in Asia’s third-largest economy and "restart the growth engine".
P Chidambaram, in his first policy statement since taking over last week, said India’s stuttering economy faced a string of challenges, from stubborn inflation to high interest rates and a spiralling fiscal deficit.
But "with sound policies, good governance and effective implementation, we will be able to overcome these challenges", said Mr Chidambaram, now in his third stint as finance minister.
"The key to restart the growth engine is to attract more investment — both from domestic investors and foreign investors," he said.
The country’s once-booming economy grew just 5.3% between January and March — its slowest annual quarterly expansion in nine years.
He said there was still "enormous goodwill" globally for India, despite anger over recent government moves seen as hostile to foreign investors, and said most people were keeping "faith with the India growth story".
His predecessor Pranab Mukherjee, who now occupies the ceremonial role of president, annoyed foreign investors in his March budget with sweeping antitax evasion rules — some of them retroactive. Mr Chidambaram promised to review the tax measures and help the country to find "fair" solutions, adding that India wanted a "non-adversarial" tax regime.
Indian business cheered Mr Chidambaram’s efforts to woo back foreign investment while shares jumped by 1.25% to 17,412.96 points — their highest close in nearly a month — helped by his statements.
"The minister’s statements should help restore confidence among foreign investors," said the Associated Chambers of Commerce and Industry of India. Mr Chidambaram said the government would aim to raise the level of investment to 38% of gross domestic product, from 32% last year.
He said it was vital to remove "distrust" in investors’ minds since investment "is an act of faith". Attracting foreign investment is needed to upgrade India’s dilapidated airports, roads and other infrastructure to ease bottlenecks and spur growth.
Mr Chidambaram took over the portfolio on the same day as India suffered a big power outage that highlighted its creaking infrastructure.
The Congress party-led government, he said, would take steps to attract investment in mutual funds and insurance and bring India’s fiscal consolidation process back on track.
But with the threat of India’s third drought in a decade looming, he said the left-leaning government would have to provide extra relief to parched farm areas and that the "fiscal correction" would have to be fairly shared.
To revive growth, he appealed for the "co-operation of all political parties" in parliament, whose next session opens tomorrow, and an end to the logjam over government moves to open up the inward-looking economy.
Sapa-AFP
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