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Is Mr FM taking all the right steps?
Wed, 31 Jul Pre-Open

India has been facing challenges on the growth front for quite some time now. This is quite evident from the fact that GDP growth, which is hovering around 5% levels now, was around 9% before the global financial crisis. Not only that, the Indian rupee is trading at its lowest levels since 1990. The other challenges such as widening CAD (current account deficit) and increasing inflation continue to impact the economy. Despite these issues, Finance minister P Chidambaram hopes of achieving better GDP for the current fiscal.

As per a leading financial, Mr P Chidambaram states that current slowdown in the economy is not expected to last long and thus hopes of achieving 6% GDP growth this fiscal. Further, he adds that the slowdown in India is due to a weak global macro environment. Rise in crude imports and the depreciation of the rupee has been further widening the deficit. And thus the government intends to bring down these crude imports from 70% of the total demand to 50%. Further, creating job opportunities through opening up more bank branches in the country also seems to be on the agenda.

In our view, there is no doubt that the problem of current account deficit has to be addressed on an urgent basis by the government. But there are various other challenges too which need to be considered by the government in order to spur growth in the economy.

One of the important reasons why the Indian economy has slowed down is decline in corporate investments. Thus the government needs to take measures to make the climate more inductive for capital investments by pushing through reforms and implementing them. Thus structural reforms are one of the important aspects to take India's growth to higher levels.

The government has acknowledged that there are problems and has been contemplating various steps to address them. But more often than not, these have been more of short term fixes. It goes without saying that a lot more still needs to be done and that too from a longer term perspective for issues pertaining to deficits and inflation to not occur on a regular basis.

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