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Singh Says Slow Economic Growth Phase in India Won’t Last Long

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India's Prime Minister Manmohan Singh
Manmohan Singh, India's prime minister, is facing a record current account deficit, slowing growth and a rising inflation rate. Photographer: Tomohiro Ohsumi/Bloomberg

Aug. 15 (Bloomberg) -- India’s slow economic growth will not last long as the government removes hurdles for stalled projects, eases foreign ownership rules and starts work on new ports and rail lines, Prime Minister Manmohan Singh said.

“Economic growth has slowed down at present and we are working hard to remedy the situation,” Singh, 80, said in New Delhi today in a speech to mark Independence Day, the date in 1947 when British colonial rule ended. Work on two new ports, eight airports, industrial corridors and rail projects will start in coming months, he said.

Singh is seeking to repair the image of his government and the ruling Congress party before elections due by May. A series of corruption allegations, a slowing economy and rising prices have all weighed on his administration. Singh responded by rolling out populist legislation to expand distribution of cheap food to the poor and ease foreign ownership rules to resurrect a stalled economic agenda.

“In the coming months, we will see visible results of these efforts to increase investment,” said Singh. “Our growth will accelerate, new employment opportunities will be generated and there will be improvements in the infrastructure sector.”

This was Singh’s 10th consecutive Independence Day speech.

Economic Woes

Singh is facing a record current account deficit, slowing growth and a rising inflation rate. Eleven months after India began easing caps on foreign-direct investment and restrictions on the bond market to spur growth, data this week showed a contraction in industrial output and an increase in price pressures.

Industrial production fell 2.2 percent in June from a year earlier, while consumer prices rose 9.64 percent year-on-year in July, government reports showed on Aug. 12. The current-account imbalance widened to an unprecedented 4.8 percent of gross domestic product in 2012-2013.

“It is not only our country that is facing economic difficulties. The last year has been difficult for the world economy as a whole,” Singh said from behind a protective enclosure while addressing the nation from Delhi’s 17th-century Red Fort. “I believe that this phase of slow growth in India will not last long.” he told to an audience of school children, civilians and members of his government.

Currency Decline

The rupee has fallen more than 10 percent this year, the worst performer in 2013 after the yen in a basket of 11 Asian currencies tracked by Bloomberg.

The government raised import tariffs on gold and silver on Aug. 13 as part of steps to ease the deficit and reduce pressure on the currency. The move to check imports comes after the central bank raised two interest rates last month to fight the rupee slump that risks fueling inflation.

Yesterday, the Reserve Bank of India cut the amount local companies can invest overseas without seeking approval to 100 percent of their net worth, up from 400 percent.

Singh’s government aims to guarantee cheap food to the poor by law as the Congress party seeks to build on vows to spread the benefits of growth.

The government expects the parliament to approve a bill shortly, to replace an ordinance, that seeks to provide subsidized food grain to about 810 million Indians, Singh said today.

Regional Tensions

Clashes between Indian and Pakistani troops along the de facto border in the disputed territory of Kashmir this year have cast a shadow over efforts to improve bilateral ties shattered by the 2008 terrorist attack on Mumbai.

India said “specialist troops” of Pakistan’s army killed five Indian soldiers along the border Aug. 6, claims Pakistan rejected as “baseless and unfounded.”

“We will take all possible steps to prevent such incidents in the future,” said Singh. “For relations with Pakistan to improve, it is essential that they prevent the use of their territory and territory under their control for any anti-India activity.”

Pakistan’s Prime Minister Nawaz Sharif last month suggested dates for talks on access to water, and the Sir Creek maritime border, his first major peace initiative since winning elections in May. This week he called for a new beginning in relations, an olive branch that was dismissed in the Indian media after the reported gun battles.

The territory of Kashmir is the biggest hurdle to India and Pakistan improving ties. The neighbors have fought two of their three wars over Kashmir, which is divided between them and claimed in full by both.

To contact the reporter on this story: Bibhudatta Pradhan in New Delhi at bpradhan@bloomberg.net

To contact the editor responsible for this story: Hari Govind at hgovind@bloomberg.net

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