CEE Oct-Dec 2012

India can start reversing the slowdown trend by improving its investment climate and expediting reforms, ADS's chief economist Chang Yong Rhee said in a statement. "Tight monetary policy to counter persistently high inflation and a high deficit leave little room for policy to stimulate growth. However, restoring investor confidence can help jumpstart critical infrastructure projects that could get the economy moving, " Rhee said. The report acknowledged some of the recent economic measures taken to revive growth and investor sentiment in India. "A controversial proposal to review tax avoidance on foreign investments has been deferred by three years and a new plan for fiscal consolidation is expected. In September 2012, diesel prices were hiked by about 12 per cent and the use of subsidized liquefied petroleum gas was capped to contain the fiscal deficit," it noted. ADB further said a "long needed but politically controversial decision" to permit foreign direct investment (FDI ) in multi-brand retail chains and other liberalizing steps have boosted business sentiment and raised hopes for further policy actions. "FDI in retail will result in substantial investment in a modern agricultural supply chain that will reduce huge food losses from farm to market, helping farmers and consumers," it said. Courtesy: The Mint New Delhi, 04.1 0. 2012. MONTEK WANTS FUEL SUBSIDIES SLASHED FURTHER TO TAME INFLATION With reforms improving investor sentiment, Planning Commission deputy chairperson Montek Singh Ahluwalia wants subsidies on fuel to be further cut for fiscal consolidation and to tame high inflation. "Immediate decontrol (of fuel prices) may be too big a shock. We should put in place a policy whereby the subsidy, if any, is brought to a sustainable level and is targeted ," he said, in an exclusive interview to HT. Ahluwalia said bringing prices of petroleum products petrol , diesel, LPG and kerosene - in alignment with global prices would not only limit the fiscal deficit but would also send the "right signal" to consumers and producers. "We cannot expect consumers to economize on energy, or producers to invest in energy if the prices they expect are too low to encourage economy," he said. Ahluwalia is not against all subsidies but said their scale was not justified. Subsidy on diesel , he said, was not targeted at the poor and half of the kerosene supplied through public distribution system goes into the black market. In his view, lowering subsidy burden will have twin benefits - fiscal consolidation and reining in high inflation, key to ensure 8.2 per cent growth target in the 1 ih plan. Terming the government's recent reforms as a "step in the right direction, the 69-year-old Oxford educated economist hoped that investment sentiment is revived in the next 12 months and growth will pick from the low of 5.5 per cent in first quarter of the current fisca l year. Although the government has taken several steps, he said many more were in the pipeli ne. He also said the government was moving towards a consensus on Goods and Service Tax (GST), a key tax reform stuck because of opposition by some states. He also said the problem of fuel supply to power stations was in an advance stage of resolution and the Cabinet's recent decision of restructuring debts of power distribution companies will further improve investor sentiment, which has been "positive" after recent government initiatives. Revival of investor sentiment, Ahluwalia said, will help the government in meeting its target of $1 trillion investment in the infrastructure sector. "We have done quite well in promoting projects based on PPP in the Eleventh Plan. Now the global financial system is beginning to stabilize, I hope we will be able to finance projects of the magnitude required over the next five years," he said. Admitting insufficient income to purchase more food was a cause for hunger, he said the government needs to ensure "inclusive growth" to create employment opportunities so that incomes of the poor rise fast, a focus of the 12th five-year plan. Courtesy: The Hindustan Times New Delhi, 03.1 0. 2012. INDIA ENTERS TOP 25 GLOBAL EXPORTERS' CLUB; LAMY India has emerged as one of the top 25 leading exporters in the world along with countries like Brazil Mexico and Malaysia, WTO chief Pascal Lamy has said. "In addition to China, many new trading powers have emerged Brazil, India, Mexico and 51