NEW DELHI — India’s new government will pursue broad economic overhauls focused on job creation through public and private investment, with containing inflation a priority, President Pranab Mukherjee told Parliament on Monday.
Mr. Mukherjee said the government formed after Prime Minister Narendra Modi’s victory last month would introduce a general sales tax, encourage foreign investment and speed up approvals for major business projects.
The government will also tackle bottlenecks that have left India with one of the highest rates of food inflation among major economies.
The anti-inflationary message should be welcomed by the governor of India’s central bank, Raghuram Rajan, who has made lowering India’s high interest rates contingent on containing consumer prices.
The Indian economy is in its longest slump in a quarter-century, having grown by 4.7 percent in the fiscal year that ended in March, the second straight year of growth below 5 percent. The slowdown has dampened Indians’ aspirations to emulate the economic rise in China.
The government will “urgently pursue” an overhaul of the state-run coal sector and the military industry to attract private investment, the president said, while accelerating the clearance of projects that promote labor-intensive industries.
Ten million people are entering the Indian work force every year as the largest youth bulge in the world reaches working age. The demographic shift may help propel India into the league of developed countries, but it could also lead to economic and social disaster if it is not harnessed effectively.
“The first two years would be to create an enabling environment for growth to take off,” said Shubhada Rao, chief economist at Yes Bank in Mumbai.
“There is no trade-off between inflation and growth.” The changes include public and private investments in agriculture and a clampdown on hoarding. The government also promised to ensure that every family had a good home with uninterrupted electricity by 2022.
It will seek to revamp the creaking railway system, focusing on high-speed trains, and increase road and airport construction.
The speech contained promises to modernize government with technology and to develop broadband Internet connections for every village within five years. Many of the proposals have also been made by previous governments.
“We have heard all the right noises, but we have to wait to see all these intentions’ translating into action,” said A. Prasanna, an economist with ICICI Securities in Mumbai.
nytimes.com
Mr. Mukherjee said the government formed after Prime Minister Narendra Modi’s victory last month would introduce a general sales tax, encourage foreign investment and speed up approvals for major business projects.
The government will also tackle bottlenecks that have left India with one of the highest rates of food inflation among major economies.
The anti-inflationary message should be welcomed by the governor of India’s central bank, Raghuram Rajan, who has made lowering India’s high interest rates contingent on containing consumer prices.
The Indian economy is in its longest slump in a quarter-century, having grown by 4.7 percent in the fiscal year that ended in March, the second straight year of growth below 5 percent. The slowdown has dampened Indians’ aspirations to emulate the economic rise in China.
The government will “urgently pursue” an overhaul of the state-run coal sector and the military industry to attract private investment, the president said, while accelerating the clearance of projects that promote labor-intensive industries.
Ten million people are entering the Indian work force every year as the largest youth bulge in the world reaches working age. The demographic shift may help propel India into the league of developed countries, but it could also lead to economic and social disaster if it is not harnessed effectively.
“The first two years would be to create an enabling environment for growth to take off,” said Shubhada Rao, chief economist at Yes Bank in Mumbai.
“There is no trade-off between inflation and growth.” The changes include public and private investments in agriculture and a clampdown on hoarding. The government also promised to ensure that every family had a good home with uninterrupted electricity by 2022.
It will seek to revamp the creaking railway system, focusing on high-speed trains, and increase road and airport construction.
The speech contained promises to modernize government with technology and to develop broadband Internet connections for every village within five years. Many of the proposals have also been made by previous governments.
“We have heard all the right noises, but we have to wait to see all these intentions’ translating into action,” said A. Prasanna, an economist with ICICI Securities in Mumbai.
nytimes.com
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