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POLITICAL ECONOMY
"Let the Common Mantra be Growth"
Continued...
THE UNION FINANCE MINISTER'S GROWTH
AGENDA
 "...Seven years ago, when I
presented my first Interim Budget (in 1990-91), the fiscal deficit was 8.40 per cent of
Gross Domestic Product (gdp). I had targeted to cut it to 6 per cent of gdp in 1991-92.
Seven years down the line, when I presented my second interim budget, I was confronted
with a fiscal deficit of 6.80 per cent of gdp and had to yet again set a target of 6.10
per cent for 1998-99. This shows how far we have progressed in the last seven years. Why
is it that even after seven years of economic reforms, the size of the fiscal deficit is
still a cause for worry? It is because, in certain critical areas, politics still
dominates the economy. The areas where the reforms have made little headway -- financial
sector, labour laws, infrastructure policies, or streamlining of government -- are the
areas where political resistance to change is the most The balance between revenue
expenditure and capital expenditure is getting distorted. Cutting capital expenditure,
especially expenditure on infrastructure, has been convenient for governments because
resistance to such cuts is not as strong as those to cuts in revenue expenditure. A part
of future growth has to come from public spending In the past, Indian industry has been
called a spastic child, trying to compete with a normal child, i.e., foreign industry. Let
Indian industry not be a spastic child for any length of time. Indian companies must focus
on customer satisfaction, without necessarily promoting consumerism..."
The BT Reality-Check
Union Finance Minister Yashwant Sinha faces the now-familiar
challenge of containing the fiscal deficit while increasing government expenditure to
boost growth. That explains why he is vociferously decrying political interference in
managing the economy. Translated into Budget 98, his views will result in higher outlays
and revenue targets than projected in Interim Budget 98. But Sinha's unqualified appeal to
industry to face upto competition instead of clamouring for protection is a re-statement
of the non-feasibility of a level playing field for Indian business.ajpayee's ten Vows
THE UNION INDUSTRY MINISTER'S
INVESTMENT AGENDA
 "...Unquestionably, the need of
the hour is to bring growth back Accelerated project investment and enlarged Plan outlays
for infrastructure projects are seen as two important and immediate measures needed to
boost economic activity Government commitment to the building up of infrastructure, and
the creation of an environment where investment, both domestic and foreign, flow into the
sector has been spelt out in the National Agenda. The ensuing budget will give us an
opportunity to give concrete shape to these commitments. The enhanced resource-flow will,
undoubtedly, be matched by an accelerated reforms process. We will speed up the process of
internal liberalisation. Foreign Direct Investment is welcome not only for the capital,
technology, and management skills associated with it, but also (for) the employment and
exports it can generate The government has plans to boost the employment potential in the
economy which it will unveil We need to forge new links of partnership and co-operation
between government and industry. The downturn in the economy is a passing phase and, by
most indications, has bottomed out. What is ahead of us is enormous potential for
growth..."
The BT Reality-Check
The most non-committal among the economic ministers, Bakht,
and his lacklustre statements, indicate that he is ready to be led by the finance minister
and the prime minister in ushering in reforms. However, by including employment-
generation and exports in the criteria for Foreign Direct Investment approvals, Bakht has
left the actual rules of the game more arbitrary than ever before.
THE UNION POWER MINISTER'S REFORMS
AGENDA
 "...Given its importance in the
economy, the power sector should be shielded from political vagaries. The regulatory
commissions to be set up -- at the Centre and state-levels -- will achieve this. These
commissions will not only function as a tariff-regulatory body, but will also advise the
government on long-term planning, encourage state electricity boards to become more
efficient, and will look into the matter of continuing with various incentives. The
Central Electricity Authority (CEA) will also have a role. It is true that the industry
has come to have doubts about the CEA's role, but that is due to the fact that the CEA, at
present, is not doing what it was set up to do The memorandum of understanding route will
be discouraged and, instead, competitive bidding will be adopted for the award of all
projects. A standard methodology will be adopted for the evaluation of all projects. The
process of project clearance will be computerised, and there will be a checklist. All
these steps will render the process transparent In the next 12 months, 15 mega
power-projects will be announced, with a total generating capacity of 75,000
megawatts..."
The BT Reality-Check
The first reformer in the Vajpayee Administration has not
only announced a bold package of reforms, but has also ensured that his proposals do not
come unstuck in Parliament by taking the Opposition into confidence. That will ensure that
his proposals sail through that hurdle. Ultimately, however, the co-operation of the state
governments, and of his government's coalition partners, will hold the key. |
