New Delhi, July 19: Prime Minister Manmohan Singh Friday assured captains of industry that the government will not leave any stone unturned to improve the economy and expressed hope that the Current Account Deficit (CAD) will come down to 2.5 percent in the coming years.
Admitting that the country is going through a difficult period, he said: "I know that business is deeply concerned about the slowdown in our economy. It is looking to the government to bring the economy back to a higher growth path. This, I believe, is a legitimate expectation and is also upper-most in our mind.
"When things are going well, government should interfere as little as possible. When things are going bad, as they seem to be at present, it is the responsibility of the government to become more pro-active," he said at the 92nd annual general meeting of Assocham here.
The prime minister observed that the most immediate cause of worry was the recent volatility in foreign exchange markets, which was caused due to global markets reacting to the likelihood of a withdrawal of Quantitative Easing-III by the US Federal Reserve Bank.
"Large volumes of funds were withdrawn from emerging markets and there was a depreciation in many emerging market countries including Turkey, Brazil and South Africa. We too experienced a significant depreciation in the exchange value of the rupee. In our case, it was perhaps exacerbated by the fact that our current account deficit in the balance of payment had increased to 4.7 percent of GDP in 2012-13.
"Ideally we should bring the current account deficit down to 2.5 percent of our GDP. It is clearly not possible to do this in one year, but I expect that the current account deficit in 2013-14 will be much lower than the 4.7 percent level recorded last year.
"It will decline further next year. We will use all policy instruments available -- fiscal, monetary and supply side interventions to ensure that the Current Account Deficit declines further over time."
He said the government is committed to bringing the current account deficit under control by addressing both the demand side and the supply side of the problem. On the demand side, he said, "we need to reduce the demand for gold and the demand for petroleum products - the two biggest components of our trade deficit".
He said gold imports declined sharply in June while on petroleum products, the government has last year begun a process of correcting the prices.
"The gradual correction that was taking place in diesel prices has reduced the gap in under-recoveries from almost Rs.13 per litre to less than Rs.2 per litre."
The government has targeted fiscal deficit of 4.8 percent of GDP during 2013-14 and announced continuing reductions of about half a percent each year subsequently, up to 2016-17.
He, however, said the country has targeted 6.5 percent growth at the time of the budget this fiscal (2013-14).
"But it looks as if it will be lower than that."
He added: "What is important is that the economy should turn around from 5 percent achieved last year. There is a very good chance that we can achieve that with good agricultural performance and the effect of the various actions we are taking on infrastructure."