Tokyo: Asserting that India has to sort many internal issues, Finance Minister P Chidambaram on Monday said containing fiscal deficit, current account deficit and inflation are big challenges that country is facing currently. However, he maintained that the problems were being addressed and that fiscal deficit will reach the target of 3 per cent in 2016-17.
In Tokyo for a three-day visit to woo investors, Chidambaram told a press conference that foreign investors continue to place confidence in India. "We have to sort out many internal issues. We have to contain fiscal deficit. We have to tame inflation. We have to find ways in which projects are executed on time and efficiently. We are addressing these problems. These in my views are biggest challenges facing India today", he said.
The Minister said that Indian economy was growing between 5 and 5.5 per cent in the just-ended financial year which he was not happy with. "I am not happy. We are growing at only 5 to 5.5 per cent, because our people require at least 8 per cent growth," he said, adding India's potential growth is 7 per cent a year. The economic growth in the current financial year has been estimated at around 6.1-6.7 per cent.
On fiscal deficit, he said, it was brought down to 5.2 per cent in 2012-13. Every year it has been reduced by 0.6 per cent and the country will achieve fiscal deficit target of 3 per cent by 2016-17. Observing that India can absorb $50 billion foreign investment every year, Chidambaram said "Foreign investors continue to place confidence in India. Both in respect of FDI and FII, the flows into India have been among the highest in 2012 and the flows are quite large and copious."
The Minister said that the new trade policy to be released in three-four days would show India's commitment to reforms. Faced with muted export growth, the policy is expected to announce specific steps to boost Indian exports. Measures to boost exports assume significance in view of the widening Current Account Deficit (CAD) which touched a historic high of 6.7 per cent of the GDP in quarter ending December.
"The current account deficit is indeed large and a matter of concern. For 2012-13, (CAD) has been fully financed by foreign exchange inflows, without touching our foreign exchange reserves. In fact, we may have even added to our foreign exchange reserves", the Minister said. According to the Reserve Bank data, country's foreign exchange reserves, despite adverse conditions, rose by $1.1 billion during April-December 2012 to over $293 billion. The Indian government has taken several initiatives to attract foreign investment and the Minister had earlier visited several major financial markets like Singapore, Hong Kong, Germany, Canada and the UK to sell India's growth story.
The Minister has also met institutional investors to garner investment for various sectors including infrastructure, the requirement for which had been pegged at around $1 trillion during the Five Year Plan (2012-17). India has received FDI of $22.8 billion during 2012.