Indian Prime Minister Manmohan Singh vowed to revitalize growth in Asia’s third-largest economy as he outlined projects including new ports, roads and power plants and urged officials to bridge differences impeding progress.
“In these difficult times we must do everything possible to revive business and investor sentiment,” Singh said yesterday in a statement in New Delhi. “We as a government are committed to taking the necessary measures to reverse the present situation.”
Singh is under pressure to support an economy expanding at the weakest pace in nearly a decade as policy gridlock deters investment and Europe’s debt crisis hampers exports. Gross domestic product rose 5.3 percent last quarter from a year earlier, compared with India’s aim of 9 percent annual expansion and $1 trillion infrastructure spending from 2012 to 2017.
The government yesterday outlined port projects worth an equivalent of about $6.3 billion for the financial year through March 2013, an investment target of $3.6 billion for Mumbai’s elevated rail corridor and plans to add airports. It also set goals of building 9,500 kilometers (5,904 miles) of roads in the 12-month period, up 18.7 percent from last year, and adding about 18,000 megawatts of power generation capacity.
“Everyone knows what India needs to do to revive growth,” said Dharmakirti Joshi, Mumbai-based chief economist at Crisil Ltd., the local unit of Standard & Poor’s. “The fire is already there, now what we need is to act with a firefighter’s zeal.”
Shares in construction companies advanced. Larsen & Toubro Ltd., India’s biggest builder of power networks and airports, rose 1.5 percent as of 1:36 p.m. local time. Bharat Heavy Electricals Ltd., the nation’s largest power-equipment producer, gained 0.6 percent. Reliance Infrastructure Ltd. was up 2.9 percent. The BSE India Sensitive Index climbed 1.1 percent.
Singh made his comments at the end of a meeting to finalize construction targets for the current fiscal year. His government is facing one of its most challenging periods since taking office in 2004 as it grapples with a trade deficit, elevated inflation, a budget shortfall and faltering global growth.
A slump in the nation’s currency has underscored concern that India’s economic outlook is at risk of deteriorating. The rupee has tumbled about 19 percent against the dollar in the past year, the most in a basket of 11 major Asian currencies tracked by Bloomberg. The Sensitive Index has declined 10 percent over the same period.
“The challenge now is to work together to achieve these targets, and deal with all the bottlenecks that may come in the way,” Singh said. “I would urge all the ministries to go the extra mile in implementing what we have planned. I would expect them to very expeditiously resolve any inter-ministerial differences or turf battles that might arise.”
Discord within the ruling coalition has stymied Singh’s efforts to open up the economy further and contributed to slower investment, which Morgan Stanley estimates fell to 34.4 percent of GDP last fiscal year from 38.1 percent in 2007-2008.
The Cabinet today deferred taking a decision on whether to allow foreign direct investment in the pension fund industry, Krishna Tirath, minister for women and child development, said in New Delhi. No reason for the deferral was given.
The Cabinet was due to make a call on whether to lift restrictions. India has also foregone potential investment from overseas insurers and retailers such as Wal-Mart Stores Inc. in the past year.
“The next two months are going to be a critical time for the government,” said Satish Misra, a political analyst at Observer Research Foundation, a policy-research group based in New Delhi. The government needs to take action now to revive the economy before the next election scheduled for 2014, he said.
The economic slowdown and an oil-price drop suggest more room for another interest-rate cut even as inflation risks remain, Reserve Bank of India Deputy Governor Subir Gokarn said earlier this week. The monetary authority lowered borrowing costs to 8 percent from 8.5 percent on April 17.