News and Events

FM launches appeal over flailing economy

Indian finance minister appealed on Saturday to fractious government allies and a hostile opposition to cooperate in the national interest to restore the health of Asia's third largest economy.

Mr Pranab Mukherjee's call came as global ratings agencies and investment houses warned that India's weak public finances and political paralysis over reform measures were clouding the nation's financial prospects.

Getting India's economy back on track is a question of broad national interest that is staring us in the face, Mr Mukherjee told the Federation of Indian Chambers of Commerce and Industry in a bluntly worded speech.

The minister said that he was committed to protecting the credibility of plans in his budget, presented earlier this month, to plug a widening fiscal deficit and trim a ballooning subsidy bill.

But Mr Mukherjee said cutting spending will involve tough decisions that we will have to take collectively, referring to coalition and opposition members who have been obstructing economic reforms at a time of slowing economic growth.

Doubts have been mounting about India's ability to deliver on its fiscal pledges amid worsening relations between the embattled ruling Congress and regional parties, whose backing it needs to retain power.

The graft tainted government of Premier Manmohan Singh has had a series of embarrassing policy flip-flops in recent months with coalition members allying with the opposition to stymie reforms.

The government's woes have been compounded by decelerating growth with expansion for the next year to March 31st 2013, targeted at 7.6%. That is up from 6.9% seen this year, but far below eight to nine percent growth for much of the past decade.

Among the hard decisions the government must make is whether to raise subsidised fuel and fertiliser prices.

Analysts said that such hikes are key to cutting the debilitating subsidy burden but the move would be unpopular among India's vast poor population and require political courage from lawmakers with elections due at the latest by 2014.