M A I N   N E W S

Global slump to have limited impact
Put fiscal reforms on fast track: EAC
Tribune News Service

New Delhi, September 10
The global economic slowdown is there to stay for some time, but the good news is it will have limited impact on India, the Prime Minister’s Economic Advisory Council has averred.

The opinion of the core group of economic experts, constituted by Mr Atal Behari Vajpayee to have a policy dialogue on crucial economic issues, came at a three-and-a-half-hour meeting of the council at the Prime Minister’s 7 Race Course Road residence.

Held in a free and frank atmosphere, the Prime Minister at the outset gave a brief summary on the state of the economy and sought the advice of the council on evolving the “right economic strategy” to tackle both immediate and long-term problems.

Some of the specific issues on which he sought the council’s suggestions included getting over the impact of the global economic slowdown, evolving an appropriate interest rate and exchange rate management strategy, measures to mobilise non-budgetary resources from the banking sector to step up spending on infrastructure, improving the efficiency of the financial sector and food management.

Mr Vajpayee said the slowdown needed to be seen in a proper perspective, with a confident recognition of the inherent strengths of the economy.

Mr Vajpayee warned that the strong indicators of macro economic health could not hide the deeper systemic maladies in the economy and said there was no room for complacency over the current economic slowdown.

The Finance Minister, Mr Yashwant Sinha, told newspersons after the meeting that on the question of slowing down of the world economy, the council was of the view that it would persist for some more time, but it would not have any major impact on India.

Except for exports and capital markets, not many areas of the economy were exposed to the global economy and it would be possible to chalk out strategies to insulate the domestic economy from the world economy.

Restraining and controlling fiscal deficit was another major issue at the meeting. It was felt that the Centre and the states should not allow fiscal discipline to go out of control. Fresh expenditure should be seen and judged in the light of this suggestion, the Finance Minister said.

Several steps in the short term, apart from expediting budgetary allocations, also came up at the meeting. These included privatisation of public sector units, downsizing of some areas of the government in the light of the recommendations of the Expenditure Commission and launching a massive food-for-work programme.

The council also suggested increased investments in sectors like construction and housing.

It was felt that capital markets should be looked at in detail and there was a need to improve investors’ sentiments.

Financial reforms need to be put on fast track and in this connection it was suggested that many of the issues taken up in the Budget should be implemented. This includes dismantling the administered price mechanism in the hydrocarbon sector, power sector reforms and reforms in food procurement and distribution.

Another prescription to revive the economy included levying user charges on components like water and electricity and reduction in import duties.

The council said the implementation of projects held the key to economic revival.

Political consensus on the economic reforms should be widened, the economic experts said, adding that it should go beyond that.

Most of the suggestions, the Prime Minister felt, were acceptable to the government. On suggestions regarding issues like stepping up tax to the GDP ratios for the Centre and the states, management of food economy, including minimum support price, restoring investors’ confidence and issues at the World Trade Organisation meeting, these were referred to the respective ministries for consideration.

Apart from Mr Sinha, the Deputy Chairman of the Planning Commission, Mr K.C. Pant, the Commerce and Industry Minister, Mr Murasoli Maran, the Law Minister, Mr Arun Jaitley, the Disinvestment Minister, Mr Arun Shourie, the Agriculture Minister, Mr Ajit Singh, the Surface Transport Minister, Major-Gen B.C. Khanduri (retd) and senior officials, including the Cabinet Secretary, were special invitees at the meeting.

The council was represented by Dr Kirit Parekh, Director, Indira Gandhi Institute for Development Research, Dr Amarish Bagchi (National Institute of Public Finance and Policy), Mr Jagdish Shettigar (BJP economic cell), Dr Rakesh Mohan (Adviser to the Finance Minister), Dr A. Vaidhyanathan (Madras Institute of Development Studies, Chennai), Dr Shankaracharya (Indian Council for Research on International Economic Relations, Delhi), Dr Ashok Lahiri (National Institute of Public Finance and Policy) and Dr R.K. Pachauri (Tata Energy Research Institute).

Dr Parekh said the main concern of the council was that the government needed to restructure expenditure and channelise it into developmental projects. This should be done without increasing fiscal deficit.

Dr Shankaracharya said slowdown in investment was a big problem and apart from public investments there was a need to boost private investments.