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MY
VIEW
Yashwant Sinha
"Feel-Good
Factor Has Dissipated"
 The
feel-good factor which had returned to the economy in mid-1999 has dissipated
to an extent. Let's delve into the causes. Firstly, global oil prices
have risen by three and a half times this year. Higher oil prices depreciated
the rupee's value. The ripples reached the stock markets where technology
stocks lost substantial values. The monsoon this year, though technically
normal, was weak and uneven. That means the kharif crop this year will
be about the same as last year. Even for the rabi crop we are keeping
our fingers crossed because reservoirs across the country don't have as
much water this year as they had last year. Then there is a noticeable
slowdown in certain industries. Cement, which grew 20 per cent last year,
has grown by only 4 per cent this year. Sales of heavy commercial vehicles
(HCVs) have fallen and capital goods production has decelerated. All this
has evaporated the feel-good factor to some extent. Mind you, today the
economic decision making, from the consumer all the way to the producer,
is much more dependent on sentiments. That is why sometimes the prophesies
of slowdown become self-fulfilling.
What are
we doing to solve these problems? This year's plan expenditure is higher
than last year's even as non-plan spending is being curbed. Work is on
schedule for the prime minister's highway project. Contracts have been
allocated for construction of 1,000 km and the remaining 3,000 km should
be contracted by the year-end. We have also taken into account the views
of Standard & Poor's, which, while downgrading India's credit outlook
recently, had remarked that reforms in India haven't progressed fast.
I strongly contest that. If we evaluate our track record of reforms, one
of the things that is frequently talked about is privatisation. The problem
is that when you do one thing, the people immediately absorb it and say
where is the next one. So, the decision to privatise Air-India and Indian
Airlines is an old story. That insurance has opened up is also an old
story. Another important area is government expenditure. The concerned
ministries are examining the report of the Expenditure Commission and
we will take a decision soon. Three private power projects will achieve
financial closure by December 31. This was initially scheduled for March
31, 2001.
We also
have sectoral strategies. For instance, if HCVs are not selling, obviously
goods movement by road is less. We have to see that more cement, more
steel, more construction material moves. Then we can expedite the construction
of 500 km of cement road-which is anyway envisaged under the current programme.
We can also speed up housing and construction and rural roads projects-all
these will create demand for cement and steel. Then there are some consumer
items like automobiles and TVS that are selling less. This could be the
result of the absence of the feel-good factor. These industries clocked
a very high growth last year. Also a lot of capacities created during
the mid-1990s have not been fully utilised.
A reason
cited for low investment is the influx of imports. While there are some
areas where cheaper imports are coming into the country, it's also true
that we haven't prepared ourselves fully for a more open import regime.
Wherever we can provide protection we will do so within the available
means. We have already exceeded the WTO bound rates of customs duties
by imposing as much as 70 per cent import duty on certain products. But
I expect Indian industry to become more competitive. That is unavoidable.
No country can be an island any more. There have been complaints of high
interest rates, rigid labour laws and inefficient infrastructure by Indian
industry. But these have been around for a long time and cannot be wished
away overnight. We are going to create special economic zones where industry
will be operating in the same conditions as industry in China does.
Where will
we be by March next year? As far as the fiscal deficit is concerned, I
have targeted it at 5.1 per cent of GDP this year and hopefully I will
meet it. I am going to Parliament with a fiscal responsibility bill which
envisages a gradual reduction in deficit over a period of time. My programme
is to reduce the fiscal deficit within the medium term and completely
eliminate revenue deficit. For GDP growth, we already have the prime minister's
target of 9 per cent. It's ambitious but other countries have achieved
it, so why can't we?
(As told
to INDIA TODAY)
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With
all the noise about the cabinet resolution on dilution of the government’s
stakes in public sector banks, is anyone buying shares of these banks,
asks V. Shankar Aiyar in 