India's new finance minister vows to 'restart growth'

India's new pro-market finance minister on Monday pledged to takes steps to restore foreign investors' faith in Asia's third-largest economy and "restart the growth engine". P. Chidambaram, in his first policy statement since taking over last week, said India's stuttering economy faced a string of challenges from stubborn inflation to high interest rates and a spiralling fiscal deficit. But "with sound policies, good governance and effective implementation, we will be able to overcome these challenges", said Chidambaram, now in his third stint as finance minister. "The key to restart the growth engine is to attract more investment -- both from domestic investors and foreign investors," he said. India's once-booming economy grew just 5.3 percent between January and March -- its slowest annual quarterly expansion in nine years. Chidambaram said there was still "enormous goodwill" globally for India, despite anger over recent government moves seen as hostile to foreign investors, and said most people were keeping "faith with the India growth story". His predecessor Pranab Mukherjee, who now occupies the ceremonial role of president, annoyed foreign investors in his March budget with sweeping anti-tax evasion rules -- some of them retroactive. Chidambaram promised to review the tax measures to find "fair" solutions, adding that India wanted a "non-adversarial" tax regime. Indian business cheered Chidambaram's efforts to woo back foreign investment while shares jumped by 1.25 percent to 17,412.96 points -- their highest close in nearly a month -- helped by his statements. "The minister's statements should help restore confidence among foreign investors," said the Associated Chambers of Commerce and Industry of India. Chidambaram said the government would aim to raise the level of investment to 38 percent of GDP, from 32 percent last year. He added it was key to remove any "distrust" in investors' minds since investment "is an act of faith". Attracting foreign investment is needed to upgrade India's dilapidated airports, roads, ports and other infrastructure in order to ease bottlenecks and spur growth. Chidambaram took over the portfolio on the same day as India suffered a massive power outage that highlighted its creaking infrastructure. The Congress party-led government, he said, would take steps to attract investment in mutual funds and insurance and bring India's fiscal consolidation process back on track. But with the threat of India's third drought in a decade looming, he said the left-leaning government would have to provide extra relief to parched farm areas and that the "fiscal correction" would have to be fairly shared. To revive growth, he appealed for the "cooperation of all political parties" in parliament, whose next session opens on Wednesday, and an end to the logjam over government moves to open up the inward-looking economy. Chidambaram, who has been keen on reforming the heavily regulated and state-controlled economy -- a legacy of socialist thinking in post-independence India -- will have the job of boosting the economy ahead of the 2014 elections. He indicated he wanted lower interest rates to spur investment and consumption. The central bank has said it wants inflation to come down from elevated levels of over seven percent before cutting borrowing costs. "Sometimes it is necessary to take carefully calibrated risks," said Chidambaram, whose periods as finance minister included the time from 2004 to 2008 when India's growth was near double-digits.