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PM says slowdown is grave; no room for complacency

Prime Minister Atal Bihari Vajpayee on Monday warned that the strong indicators of macro-economic health could not hide the deeper systematic maladies in the economy and said there was no room for complacency over the grave nature of the current economic slowdown.

Though factors like low inflation, high foreign exchange reserves and adequate food grain stock indicated strong economic fundamentals, solution to long-pending problems like poverty and social imbalances lay in faster and more balanced growth, Vajpayee said in his opening remarks at the meeting of Economic Advisory Council in New Delhi.

Admitting that there was a lower GDP growth rate, fall in industrial production, decline in exports, slump in bank credit and worsening of fiscal position, Vajpayee said: "The economic slowdown needed to be seen in a proper perspective which was essential to avoid unnecessary pessimism and panic."

"Inflation is low and stable. Our foreign exchange reserves continue to rise at $45.3 billion. The RBI has softened interest rates," Vajpayee said.

Indian IT companies continue to grow at an impressive rate despite the global slowdown. The hard work of farmers has created a huge surplus of foodgrains, he said, adding that the problem on this front is that of effective off-take and distribution to those who need food most.

"These strong indicators of macro-economic health, however, cannot hide the deeper systemic maladies in the Indian economy. Nor should they cause complacency over the grave nature of the current economic slowdown," Vajpayee said.

Noting that National Development Council has approved 8 per cent growth for 10th Plan, Vajpayee said: "A still higher growth is envisaged in the 11th Plan."

"These high targets do call for a steep climb, especially when we today find ourselves standing at the trough of a 5 per cent growth rate," he said.

"But climb this tall and difficult mountain, we must. For without faster and more balanced economic growth, there is simply no solution pending problems of poverty, unemployment and regional and social imbalances," he said.

Nor can we fulfill the inexorably rising expectations of our growing population, Vajpayee added.

Monday's meeting is being attended by Finance Minister Yashwant Sinha, Commerce and Industry Minister Murasoli Maran, Planning Commission Deputy Chairman K C Pant, Power Minister Suresh Prabhu, Divestment Minister Arun Shourie, Law and Company Affairs Minister Arun Jaitley and Agriculture Minister Ajit Singh.

Asserting that there was a need for a right economic strategy to tackle both immediate and long-term problem, Vajpayee asked the Economic Advisory Council to come out with suggestions for dealing with seven specific economic issues.

The prime minister sought suggestions on:

• How to mitigate the adverse impacts of global slowdown.
• Appropriate interest rate and exchange rate management strategy for stimulating economic revival.
• Mobilising non-budgetary resources from banking sector to step up productive public spending on infrastructure.
• Restoration of investors confidence by improving efficiency of financial sector.
• Practical measures to achieve better fiscal management
• by both Centre and state measures to step up tax GDP ratio.
• Remunerative prices to farmers and rationalisation of public distribution system to ensure food security for poor.
• Prime Minister also sought the council's view on multi-lateral trade negotiations in the face of fourth WTO ministerial meeting at Doha.

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