India's finance minister says reform will take time
Country saw growth of 5.7pc in June quarter, but industrial output and investment still sluggish
Indian Finance Minister Arun Jaitley said yesterday structural reforms to Asia's third-largest economy could only progress slowly, adding that he backed relaxing labour and land laws hated by business, along with more privatisation.
Speaking to an audience of foreign investors, Jaitley said people still needed to be convinced that making it easier to hire and fire workers would create jobs, and did not set deadlines.
"There is a lot that has to be done … I am quite satisfied with the beginning we have made but it's a long journey," Jaitley told the Indian edition of the World Economic Forum.
He cautioned against rushing into Big Bang reforms that could trigger a political backlash and derail the government's agenda.
"Reform is the art of the possible," he said, while promising not to take decisions that would send negative signals to investors.
Prime Minister Narendra Modi came to office in May with a mandate to create jobs and kick-start the economy after a long period of low growth.
Expectations are mounting that the government will take steps between now and the budget in February next year to stimulate investment.
India recorded better-than-expected economic growth of 5.7 per cent in the quarter ended June, but industrial output and investment has not yet picked up in a sustained way.
The government has taken some steps to make doing business easier and reduce red tape and subsidies. However, Modi has not moved ahead as fast on privatisation or welfare and tax reform as some of his supporters had hoped.
Anand Mahindra, the managing director of tractors-to-technology conglomerate Mahindra Group, said investment in the economy would pick up once companies saw big infrastructure projects restart.
"It takes a little while to gather momentum, and the momentum I sense is very positive," Mahindra said. "When you get backhoe loaders out there digging up earth again visibly, you will see a rush of investment."
A land acquisition law passed by the previous government and supported by Modi's party while in opposition dramatically increased compensation to farmers for land. Stringent rules requiring consensus among sellers have made it difficult for industry to buy land.
