Finance Minister Arun Jaitley expressed a vision for 8%+ growth for India and made a case for good policy versus transient populism while speaking at the Federation of Indian Chambers of Commerce & Industry (FICCI) annual general meeting on Friday, telling the leaders of India Inc. that he was looking to them to flag such matters in the next six months before the 2019 general elections.
Starting his speech by acknowledging that it had been a challenging year, he attributed global factors, such as the world's largest economy -- the US -- being a destabilising factor rather than the other way round. He cited the US-China trade war, the fluctuating oil prices, and the potential these have to affect India's currency and the domestic fuel prices, as well as their knock-on effects.
Even in the light of these challenges, the Finance Minister spoke of India having its resilience to maintain its macros within specified ranges, pointing to GDP growth rate being in the 7-8% range as well as inflation, for which he credited the RBI's Monetary Policy Committee (MPC) and the central bank's statutory inflation targeting, contrasting the current inflation numbers with the double-digit inflation under the UPA 2. He also expressed that India would be able to maintain its fiscal target despite all odds.
Coming to the focal point of his speech, about bodies like FICCI flagging sound policy and calling out transient populism, he emphasised what India was aiming to do:
"The last thing we want is to manufacture a domestic problem so our resilience to this global crisis is diluted, and therefore, the next 6 months in terms of political rhetoric are going to be very critical for the Indian economy. I do believe that a lot of what is said and raised in the next 5-6 months by many may not be an expression of their real intention. But an economy which has set a target for itself to pull millions out of poverty, to continuously aim to be among the world's fastest-growing large economies, where over the course of the next few years we intend to overtake the UK and come close to Japan in terms of our GDP, if not per capita, and in the long run, be a part of the big 3 and then evolve into a developed country."
"For people like you to flag sound policy against transient populism will all the more become extremely important."
He listed two challenges:
"I see two immediate challenges in front of us - We need to get out of the syndrome of difficulties in credit and improve the liquidity situation in markets so we don't manufacture a challenge for us that's otherwise capable of being tackled. And second, that even when election year debate goes on, many like you will have to flag to different players in the political system the importance of sound policies and how they can be blended with good politics."
Speaking about how 7-8% GDP growth had become the norm for India but was still viewed as explosive growth abroad, Jaitley thought out loud how India can grow in excess of 8%:
"Growth in the manufacturing sector or global tailwinds like in the 2000s can propel growth beyond 7-8%. Assuming it doesn't happen, how do we get out of this range which the world considers spectacular but we now view as moderate? There are several unreformed sectors of the economy. They're unreformed because reforms are the art of the possible." He listed education, state road transport and other sectors as an example.
"We've acquired a core competence in certain infrastructure sectors. The last thing we need is to not allow success stories to be converted for our own aberrations into challenges for the economy. When telecom and aviation meet me, they're both success stories... we can't let them be converted into challenges to the economy based on what's happening in the sectors itself."
He then compared India with China:
"If China dominated world economy for 30 years based on low-cost manufacturing and ability to execute projects, India's will be a the purchasing power of a band of the middle class that will attract people globally."
Coming back to the key point, Jaitley added, "The public discourse enabling this is required."
To elaborate on this, he gave an example of the recent RBI versus Government tussle, the inference being that the discourse in the case hadn't been enabling:
"Of course we respect the independence of central bank -- that's why we told them these are the problems and to use their powers", he said, adding, "I can't conceive how a sovereign government bringing up issues of the economy can infringe upon the autonomy of an institution."
His conclusion, in this case, was that "Autonomy isn't synonymous with isolationism. Telling an institution that these are the issues to be addressed can't be an aberration."
He also spoke about this in the context of the Supreme Court verdict dismissing pleas seeking a court-monitored probe into the Rafale deal:
"This doesn't only apply to these areas. All those in the area of public communication must ponder... The SC Judgment today on the defence transaction -- what were we trying to do? If we look and introspect seriously at our resilience as a nation, post-Kargil, how much time did it take for our armed forces to get rid of a few hundred players who were on a hilltop? Weeks, with considerable casualties? So doesn't our Air Force need combat aircraft with high combat capability to fire at the enemy and finish him at a distance or must you only rely on the remote technology of a gun in the Valley aiming at people standing on a hilltop?"
He added, "A 2003 decision...tendering, deciding... and in 2012 a government says 'the Rafale transaction is approved but the procedure may be looked into once again' -- a yes/no government, neither here nor there. And then the effect is that it's delayed by another decade... Enemies won't wait for our decision making process to be so long-winded. And that's where the quality of our public discourse has to be considered in all its seriousness. And this applies across the board, particularly to the issues that impact you, the Indian industry."