Finance Minister P. Chidambaram today said that without reforms the risk of a sharp slowdown in the economy would remain and the government could not take a risk.
Speaking at the inauguration of the Economic Editors Conference he said, "India's economy is challenged. The state of the economy is reflected by universally accepted indicators such as the fiscal deficit, the revenue deficit and a current account deficit. Without reforms, the risk of a sharp and continuing slowdown of the economy will be present and we cannot afford that risk," he said.
Chidambaram said that there was a need for credible and feasible fiscal consolidation, after the Kelkar panel warned that the country was on the edge of a fiscal precipice because of high subsidies
The Finance Minister also said that the GDP has slowed due to subdued investment cycle. "The slowdown in growth is attributable mainly to the global economic situation, high commodity prices inflation and a decline in investment," he said.
Overall inflation declined from 9.8% in August 2011 to about 7.55% in August 2012 but still remains 'unacceptably high', he said. "A tight monetary policy has dampened investment as well as growth particularly in the industrial sector. All of us would do well to note the limitations of monetary policy action," he added.