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Global economy can bounce back: Chidambaram

Washington, April 21 (ANI): Addressing the International Monetary Finance Committee here, visiting Indian Finance Minister P. Chidambaram has said the global economy can bounce back if the advanced economies remove policy uncertainties.

While maintaining that the Indian economy has been impacted by the global growth slowdown, Chidambaram, however, said there has been marked improvement in financial market sentiment in the recent period following some significant measures announced by policymakers in the Euro area and the United States.

“The global macro-economic situation is also beginning to stabilise. Although confidence has improved, it still remains fragile and the global economy continues to face several critical challenges,” he said.

“Despite all these uncertainties, the global economy can bounce back if advanced economies continuously keep progressing on removing policy uncertainties and if we are able to remove some of the major bottlenecks in the real sector of the economy,” Chidambaram said.

Chidambaram said global growth remains weak and the global economy continues to face several risks. He said the present state of the global economy continues to pose several challenges for policymakers in advanced and emerging economies.

Although the re-balancing of the Euro area continues, recent developments in Cyprus suggest that the situation in the Euro area is far from settled, he said.

He also spoke about India’s economic situation, saying: “Economic activity in India remains somewhat sluggish. Given its relatively high degree of openness, the Indian economy was impacted by the global growth slowdown. At the same time, several domestic constraints also acted as a drag on economic activity.”

A Cabinet Committee on Investment (CCI) has been set up to remove blockages and fast-track the implementation of large projects, especially infrastructure projects, the Finance Minister said.

Informing the IMF meeting that a plan is being implemented to gradually roll out direct cash transfers using Unique Identification Numbers (UID) beginning 2013, Chidambaram said eventually, cash transfers will be the preferred mode for the disbursement of subsidies and other monetary benefits to improve efficiency and avoid duplication and leakages.

Efforts are underway to pen the laws and implement the Goods and Services Tax (GST) and the Direct Tax Code (DTC) as early as possible, he said.

Inflation in India has begun to moderate, he said, noting that core inflation, in particular, has moderated significantly.

Observing that the authorities in India are concerned with the twin deficits and are taking measures to contain them, the Finance Minister said the gross fiscal deficit has been reduced from 5.8 per cent in 2011-12 to 5.2 per cent in 2012-13 and it has been budgeted still lower at 4.8 per cent for 2013-14.

Public debt continues to follow a downward trajectory with the central government’s gross debt declining to 45.9 per cent of GDP during 2012-13, the Finance Minister pointed out.

India’s current account deficit has remained elevated during the last several quarters mainly due to widening of the trade deficit reflecting weak external demand and large imports of oil and gold, he said.

“Although the current account deficit has been financed by increased capital flows, the government is committed to bring it down over time. Various measures taken by the government combined with recent monetary policy easing by the Reserve Bank of India are expected to revive investment activity and help take the economy to a high growth trajectory.” (ANI with inputs)