Despite potential headwinds, including the impact of the erratic monsoon on farm output and coal shortages tempering electricity generation, Finance Minister Arun Jaitley on Saturday predicted faster growth in the coming months.
A day after the government released its strongest economic growth numbers in over two years, the Finance Minister said that rekindling the investment cycle remained the top priority for the government and the steps taken by it should start yielding results in the coming months.
“With the long-term impact of all the initiatives we have taken, I am sure the impact in the coming quarters will be much larger,” said Jaitley. Pointing to a surge in manufacturing orders, a revival in the capital goods industry and renewed international investor interest, he said he expected higher GDP growth than the 5.7 per cent recorded in the quarter ended June 2014.
“In the first quarter, a 5.7 per cent growth rate is encouraging. With the long-term impact of all the new initiatives setting in, I am sure the impact in the coming quarters will be much larger,” Jaitley said at a press conference here.
The Finance Minister said there has been a sharp change in the attitude of foreign investors towards India. “When we came to power, our priority was to contain inflation, restart the growth agenda and keep fiscal deficit at acceptable limit… The economy was facing significant challenges while decision-making had slowed down. We were ceasing to be on the investors’ agenda while the mood was significantly low. It is in this backdrop that we took over. (However) election result itself was a mood changer,” he said, adding that the government is clear about the direction in which it wants to move.
On inflation, Jaitley admitted that the weak monsoon poses a challenge in the coming months. “There has been by and large moderation of inflation. Normally, this is the time when the prices of some vegetables become steep. This year, a special effort has been made… The Department of Consumer Affairs is making a special effort. The country has enough food stock… Monsoon may have some effect only where there is drought,” he said, responding to a query on the food price situation in the country.
Asked when the industry can expect a cut in interest rates, Jaitley said, “I hope very soon. I hope that those who decide are also listening.” The RBI has been maintaining a hawkish stand with regard to the monetary policy on the ground that inflation is still too high for comfort. Consumer prices rose 7.96 per cent in July, compared with a year earlier, after climbing 7.46 per cent in June. However, the stand has attracted criticism from the industry, which argues that high interest rates have been choking growth and investments.”
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