Arun Jaitley sees economic growth speeding up

NEW DELHI Sat Aug 30, 2014 5:58pm IST

Prime Minister Narendra Modi speaks with India's Finance Minister Arun Jaitley (L) during the launch of the Jan Dhan Yojana, or the Scheme for People's Wealth, in New Delhi August 28, 2014. REUTERS/Adnan Abidi

Prime Minister Narendra Modi speaks with India's Finance Minister Arun Jaitley (L) during the launch of the Jan Dhan Yojana, or the Scheme for People's Wealth, in New Delhi August 28, 2014.

Credit: Reuters/Adnan Abidi

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NEW DELHI (Reuters) - A day after the best economic growth figures in more than two years greeted Prime Minister Narendra Modi's first three months in office, the finance minister on Saturday predicted faster growth to come.

Finance Minister Arun Jaitley said he expected GDP growth higher than the 5.7 percent it clocked in the three months until June as a series of government measures take effect.

The GDP numbers were released on Friday.

"With the long-term impact of all the initiatives we have taken, I am sure, the impact in the coming quarters will be much larger," Jaitley said, citing rising manufacturing orders and renewed investor interest in India.

Since taking office in May, the government has loosened restrictions on foreign investment in defence, moved to reduce red tape for business and started tentative labour reforms.

Speaking late on Friday, Modi said the measures had resulted in economic stability and India would "very soon" achieve "greater heights".

Jaitley said inflation was on a downward trend and that he was more confident now of meeting a tough fiscal deficit target of 4.1 percent set in the budget in July, despite having breached the target in the first four months of the year.

"What was then accepted as a challenge, with the first quarter (GDP) results, I think, it is something that is certainly achievable," he told reporters.

"My confidence today of achieving this target is much more."

India's high deficit and consequent government borrowing is often cited as a constraint on growth, since it squeezes the availability of credit for private companies.

Some private economists consider the deficit target optimistic, citing weak tax receipts in a sluggish economy and high federal expenditure commitments.

But the finance minister said tax receipts would improve later in the year and that work on reducing subsidies that weigh on the deficit would start this year. Another finance ministry official said sales of government stakes in state-run companies would begin within three months.

Jaitley said economists who cast doubt on the government's predictions should accept that India was changing for the better and look for "silver linings" rather than "gloom."

(Reporting by Rajesh Kumar Singh; Writing by Frank Jack Daniel; Editing by Rosalind Russell)

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