Finance Minister P Chidambaram feels investment in the economy will start rising this month and will soon transform the mood.
"I am quite sure you would find investments picking up in third and fourth quarters of this fiscal year and once domestic investments pick up and foreign investments also come, the mood will change rapidly," he said.
Chidambaram's remarks came in New Delhi on Monday at the annual Economic Editors' Conference. During the course of his 80-minute engagement with the media, Chidambaram underscored the importance of investment in driving economic growth.
"Growth comes from higher investment," he said. Chidambaram declined to make a forecast about the current financial year's growth, except to suggest that it would be higher than the first quarter's (April-June) growth of 5.5 per cent.
Investment as a percentage of gross domestic product touched 38.1 per cent in 2007-08 and since then it has dropped. In 2010-11, investment was 35.1 per cent of GDP.
He also chose to temper expectations of India's growth trajectory
hitting the 9 per cent mark in the near future. It would be "premature and ambitious to talk about 9 per cent growth," he said.
Flanked by the junior minister in the finance ministry Namo Narain Meena and the head of the ministry's bureaucracy, finance secretary, Raminder Singh Gujral, Chidambaram's replies were usually short and precise. At times the press conference resembled a tutorial on the economy as Chidambaram sought to explain the economic logic behind trying to prune fiscal deficit and create more space for foreign investment.
Chidambaram took the opportunity to emphasize the government's commitment to keeping the fiscal deficit viable and promised a new five-year roadmap on fiscal target
would be announced this financial year.
Chidambaram's conviction on pruning fiscal deficit came through clearly. What is not clear, however, is the space politics would give the finance minister to see through his plans. After all it was Chidambaram, as finance minister in the previous government, who announced in the 2008-09 union budget that he could not stick to the deficit targets in India's most ambitious fiscal reforms legislation, Fiscal Responsibility and Budget Management Act, on account of the government's social sector spending.
It is early days yet for the current round of fiscal consolidation.