* PM wants to end "climate of pessimism"
* India should tackle tax, insurance problems - PM
* PM says worried about rupee, capital flows
By Matthias Williams
NEW DELHI, June 27 Prime Minister Manmohan Singh
summoned officials on Wednesday to formulate an economic revival
plan in part addressing problems in tax policy and said he also
wanted to revive the "animal spirit" of Indian economic growth.
Seeking to overcome pessimism about Asia's third-largest
economy, Singh, in remarks released by his office, stressed that
improving investor sentiment was a top priority.
A slowdown in the insurance industry must also be addressed
and, in a rallying call to assembled officials, he called on
them to "revive the animal spirit in the country's economy".
Singh takes the helm of the finance ministry at a time when
economic growth has dipped to its slowest pace in nine years,
the rupee has hit all-time lows against the dollar, the
government is grappling with bloated fiscal and current account
deficits and inflation remains stubbornly high.
"I'm glad he's talking about specifics rather than
broad-brush issues," said Abheek Barua, chief economist at HDFC
Bank in New Delhi. "It's a move forward from what was happening
Despite being hailed as the architect of landmark economic
reforms in 1991, Singh struggled to put his stamp on the economy
after becoming prime minister in 2004.
Business leaders and economists have harshly criticised his
government's management of the economy, accusing it of
complacency in the face of the economic slowdown.
Finance Minister Pranab Mukherjee stepped down on Tuesday to
run for president, allowing Singh to step in.
"The growth rate has taken a dip; the industrial performance
is not satisfactory; things are not rosy on the investment
front; inflation continues to be a problem," he told officials
at the meeting in his office.
"On the external front, I am concerned about the way the
exchange rate is going. Investor sentiment is down and capital
flows are drying up."
RESTART THE GROWTH STORY
Investors have been pushing the Indian government to cut its
fuel subsidy bill and implement a shelved reform to open up its
$450 billion retail sector to foreign supermarkets. Singh
discussed both issues with the officials but no decisions were
taken, a source who attended the meeting said.
"We need to work to get the economy going again and restart
the India growth story," Singh told the officials, according to
"There are problems on the tax front which need to be
addressed," he added.
"The insurance sector has seen a slowing down which is not
normal in a country with large unmet insurance needs. This needs
to be looked into." he said, without going into specifics.
Earlier this year India put on hold a controversial plan
that would retroactively tax some transactions. Meanwhile,
implementation of a plan to streamline taxes through a national
Goods and Services Tax has been stalled.
In the crowded insurance industry, a long-pending increase
in foreign investor holdings is on hold and many joint ventures
with foreign partners are losing money.
Singh called for a resolution of problems in the mutual fund
sector, where a regulatory change banning distribution fees has
"I'm glad he actually referred to a couple of sectors which
certainly have problems that need to be addressed urgently,"
HDFC's Barua said.
India's economic growth slipped to 5.3 percent in the first
three months of this year compared to 9.2 percent in the same
quarter of 2011.
The government's immediate emphasis is to manage its balance
of payments, said Singh, who is expected to handle the finance
portfolio until September
"In the short run we need to revive investor sentiment, both
domestic and international," he added. "Millions of our
countrymen look up to the government to throw open channels for
their progress, prosperity and welfare."