He was addressing a gathering of leaders of Fortune 500 companies at Chicago Council of Global Affairs here. Following widespread opposition, including from its own ally, the government put on hold its decision to allow 51 per cent Foreign Direct Investment (FDI) in multi-brand retail on November 24. The government, however went ahead with its decision to increase the FDI level in single-brand retail to 100 per cent from the earlier 51 per cent.
Mukherjee said the world economy is passing through turbulent times and the lingering after effects of the global financial crisis have of late become more pronounced. "We have seen that the real danger to the global economy lies in the rapid contagion through today`s globally integrated financial markets...We cannot afford to have a piecemeal stop-go approach to address the issues confronting us," he said.
Talking about the Indian economy, he said it is, in some ways, better placed than many other nations to withstand a fresh round of global economic turmoil. Mukherjee said the key objective in the current year is "to regain the growth momentum, strengthen the moderation in headline inflation..., rejuvenate the markets and improve the business sentiments which have been at low levels for most of the last year".
Mukherjee said, however, "The task is not easy in the present state of the world economy, especially in the Euro zone, given the downgrades in sovereign ratings and the pressure on the Indian currency, all of which have a bearing on the capital flows and trade," he added. Asserting that there are a lot of positives which draw on the fundamentals and resilience of the Indian economy, Mukherjee said, "Policy measures have been taken to mitigate the consequences of adverse global developments and ensure sustained growth, led by domestic drivers".
India`s GDP growth in the first half of 2011-12 is estimated at 7.3 per cent as against 8.5 per cent last year. "We have been able to keep the adverse impact of global slowdown and uncertainty on our economy to the minimum," he added. Mukherjee said that one of the major fallouts of the global crisis has been the conscious attempts by governments to take a critical look at the architecture of their financial systems with an eye on improving financial stability.
"There is no one-size-fits-all approach in this and while the broad principles can be agreed upon, the exact nature of reforms have to be very specific," he noted. He said the global financial crisis and its after effects have forced many of us to take a re-look at some of the basic principles of economics and finance. Mukherjee said, "While we take steps to address the resurgent immediate concerns for the stability and recovery of the world economy, we need to also move on correcting the underlying global imbalances. "If we need to add demand to the global economy, to offset the moderation of demand in industrialised countries, a good way of doing that is to expand infrastructure investment in developing economies."