The new man in charge of the finance ministry is an economist, and it shows. Within 24 hours of taking over the additional responsibility as finance minister, prime minister (PM) Manmohan Singh on Wednesday exhorted senior ministry bureaucrats to ‘revive the animal spirit in the country’s economy’ and ‘reverse the climate of pessimism’ — thereby making it clear that he means business. He is also keen on reassuring domestic and international investors about the India story.
During a one-and-a-half-hour meeting with chief economic adviser Kaushik Basu and five secretaries of the finance ministry, the PM on Wednesday urged the officials to take steps to boost investor sentiments. “In the short run, we need to revive investor sentiment, both domestic and international,” Singh said.
Acknowledging the fact that the country was facing ‘challenging times economically’, Singh said there was an urgent need to work on both external as well as domestic factors. “Problems on the tax front need to be addressed. We need to see how we can improve matters. There are issues about the mutual funds industry which need to be resolved. The insurance sector has seen a slowing down which is not normal in a country with large unmet insurance needs. This needs to be looked into,” he said.
On the external front, Singh said: “I am concerned about the way the exchange rate is going. Investor sentiment is down and capital flows are drying up. There are some external reasons and we need to work towards making our country resilient in meeting these external challenges.”
In a statement that indicates what the PM thinks about foreign direct investments in multi-brand retail and civil aviation, Singh said: “Millions of our countrymen look up to the government to throw open channels of their progress, prosperity and welfare.”
Having secured political ground in the run-up to the presidential election, it is most likely that the PMO will now push aggressively for FDI as it is widely being perceived as a ‘sentiment booster’.
The PM acknowledged that fixing balance of payments was the immediate priority of the finance ministry. “Immediate emphasis is to manage the balance of payments for which all policies should be directed to help institutional flows to India,” he said.
Sources said the retrogressive taxation announced in this year’s budget was not discussed. It is unlikely that the PMO will immediately revisit the Vodafone tax matter though Singh was at loggerheads with finance minister Pranab Mukherjee on the issue earlier.
