Highlighting the country’s macro-economic issues, Finance Minister P Chidambaram said that rising inflation along with the fiscal and current account deficit (CAD) together pose as major challenges for growth. With the objective to boost confidence of foreign investors investing in India, during the three-day visit to Japan, Chidambaram said that they had to sort out many internal issues like fiscal deficit and CAD and also tame the rising inflation in the country.
Adding further he said that they were addressing the problems and that fiscal deficit would reach the target of 3 percent by 2016-17. Chidambaram said that in the last fiscal India’s economy grew by only 5 to 5.5 per cent, which was below its potential growth of 7 per cent a year. The economic growth in the FY14 has been estimated at around 6.1-6.7 per cent.
Regarding the fiscal deficit, he said that in FY13 it was brought down to 5.2 per cent of GDP. Further the minister said “The current account deficit is indeed large and a matter of concern and during 2012-13, CAD has been fully financed by foreign exchange inflows, without touching the foreign exchange reserves, instead, foreign exchange reserves have rather increased”. As per the Reserve Bank of India (RBI), country’s foreign exchange reserves rose by $1.1 billion during April-December 2012 to over $293 billion.
Finance minister emphasized that India is favorable place for investment and said that foreign investors continue to place confidence in India and the country is getting $50 billion foreign investment every year and during the year 2012 India has received $22.8 billion through FDI alone.
The government has taken several initiatives to attract foreign investment and the finance minister had visited several major financial markets like Germany, Canada, Singapore, Hong Kong, and the UK to sell India’s growth story. Chidambaram has also met with the institutional investors in Japan to garner investment for various sectors including infrastructure the requirement for which had been pegged at around $1 trillion during the Five Year Plan (2012-17).
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