With global markets slumping and currencies weakening, Prime Minister Narendra Modi held a three-hour long meeting with industrialists, bankers, government officials and economists on Tuesday to assess the current situation to come out with a solution.
And the consensus that emerged among the 27 speakers at the close-door conference at PM’s residence at 7 Race Course was that India needed to fire on all cylinders to capitalise on the opportunities that the current domestic and global situations have thrown up.
For this, Modi urged the private sector to enhance to its risk-taking ability by expanding investments and kick-starting the economic growth cycle.
“It is now for the private sector to increase their investment. Conventionally, compared to others, the private sector has a greater risk taking ability because their entrepreneurship emanates out of this (risk-taking capability). Public investment has grown but pace of private investment needs to be hastened,” said finance minister Arun Jaitley.
He said the participants felt volatility had become a norm and it was going to result in some turmoil in the markets and currencies.
“Under these circumstances, India would be one of the lesser impacted economy because our fundamentals are strong, and also (there are) opportunities for us. They (participants) suggested steps in the direction of further strengthening the India’s economy,” he said.
Jaitley said one of the suggestions was the need to concentrate on agriculture, which would have a spillover effect on other sectors through improved rural demand.
Other recommendations included speeding up investments in infrastructure, de-stressing the stressed sectors, particularly steel, textile and discom, labour and capital costs and emphasis on reviving stalled projects.
According to him, there was particular reference to two legislations relating to bankruptcy code and clarity on the definition of corruption in the Prevention of Corruption Act.
“The government has already taken a step (on Prevention of Corruption Act). We informed (the participants) that even bankruptcy code is in the final stages of drafting,” said Jaitley.
Reliance Industries chairman Mukesh Ambani, Tata Group head Cyrus Mistry, Aditya Birla Group head Kumar Mangalam Birla, Sunil Bharti Mittal of Bharti Airtel and ITC chief Y C Deveshwar attended the meeting. RBI governor Raghuram Rajan, ICICI Bank CEO Chanda Kochhar, and economists Subir Gokaran as well as Niti Aayog vice chairman Arvind Panagriya were also present.
Arvind Subrmanian, chief economic advisor (CEA), said three major global events were analysed at the meeting: US Fed policy, geopolitical situation and its impact on oil prices, and slowing Chinese growth.
“The fact that China is trying to change its model of development – less manufacturing and manufactured exports, and more consumption. This, in a sense, releases investment opportunity also for other countries (read India),” he said.
Subramanian said lower oil prices were in favour of India because India was a net importer of it.
“It (cheaper oil) is going to help maintain macroeconomic stability because oil is such a key determent of inflation, fiscal deficit and current account deficit (CAD),” he said.
According to him, easing prices of other commodities such as steel, coal and cement was also helping India, which has to build massive infrastructure to realise its Make in India dream.