New Delhi: Terming business mood in the country as unduly pessimistic, Prime Minister Manmohan Singh Wednesday said the Indian economy is facing a temporary downturn and can return to 8 per cent growth path with speedy and decisive government action.
Attributing the growth rate slipping to decade low of 5 per cent to global slowdown, he said domestic constraints "must be removed if the economy is to perform at full potential."
Addressing the CII AGM after a seven year gap, Singh said: "If the business mood was unduly optimistic in 2007, I think it is unduly pessimistic today. This needs correction."
The growth has slowed to 5 per cent which is "clearly disappointing", he said, adding that this is not a permanent reduction in the longer term growth potential.
"I do not believe our future is 5 per cent growth. We grew at an average of about 8 per cent in the last ten years and we can get there again. But this calls for speedy and decisive government action," he said.
The country has to cope with weak exports and higher Current Account Deficit (CAD), which is due to global factors, he said adding the CAD will be around 5 per cent of GDP in 2012-13.
"We cannot do much about the global slowdown. We can only wait for the world to get back to more normal conditions ... But we can act forcefully to deal with the many domestic constraints that have arisen...".
Observing that the high fiscal deficit is unacceptable, Singh said: "We are determined to do everything possible to achieve the fiscal deficit target".
As per the road map, the government aims to bring down the fiscal deficit to 3 per cent of GDP by 2016-17. "I would urge Indian industry to have faith in our determination and avoid getting swamped by negativism," he said.
The government, Singh said, will take all steps to ensure that foreign fund flows remain strong and restore the macro- economic balance.
"Corruption is a problem. Bureaucratic inertia is a problem. Managing coalition is not easy. But these problems have not arisen suddenly. They were all there even earlier when the economy was growing at 8 per cent," he said.
He further said the Cabinet Committee on Investment (CCI), set up in December 2012, has made significant progress in clearing large projects which were held up for long.
In the petroleum sector, he said investments worth USD 20 billion for exploration and production activity in 40 oil blocks had been held up for many years because of security clearances.
"The CCI has made a difference. Clearances have been given for 5 blocks. We hope to resolve issues relating to another 31 blocks within the next two weeks.
"I believe the progress we have achieved is particularly significant because these blocks were awarded many years ago, but were held up for want of clearances," he said.
The Prime Minister further said the fuel supply -- both coal and gas -- to power projects has been posing problems. "The ministries are working to reach a resolution of these problems in a time bound manner. I hope we will see results in the next three weeks," he said.
Singh further said the government is reviewing the Foreign Direct Investment (FDI) policy "comprehensively to see what more can be done in the coming months".
It has already liberalised FDI policy in the multi-brand retail, aviation and other sectors in September last year.
"This decline in investment must be reversed. The most important thing we can do to revive investment climate domestically is to deal with the many impediments affecting the implementation of infrastructure projects," he said.
Singh further said it was necessary to bring inflationary pressure under control. "Inflation has been a problem and though it is softening, it needs to be brought down further." He said the government has taken calibrated steps towards rationalising fuel subsidies.
"Diesel is moving gradually towards market based pricing over the next few months. The subsidy outflow on LPG has also been capped," he said, adding that the Direct Benefits Transfers based on the Aadhaar platform will plug leakages and ensure better targeting of subsidies.
He said fiscal expansion has led to widening of the CAD. "We financed a CAD of USD 90 billion in 2012-13 without a loss in forex reserves," Singh said adding the government will take all steps to ensure that inflows remain strong for the next two years.
"Other reform measures are also being contemplated," Singh said adding the recommendations of the Financial Sector Legislative Reforms Committee are under consideration.
"The Land Acquisition and Rehabilitation and Resettlement Bill has been cleared by the Cabinet and will soon go to Parliament," he said. The CCI, he said, has streamlined the processes of granting environment and forest clearances for mega projects.
"Clearances for 12 coal mining projects have been fast tracked. These projects would add 37 million tonnes to our annual coal production," he said. In the power sector, the CCI has resolved issues relating to the NTPC's proposed 2,000 MW project in Jharkhand's North Karanpura area.
"This project, to be built at a cost of Rs 14,000 crore, had been pending for the last 13 years because of differences between the ministries of Power and Coal," Singh added.