The Hindu : Chidambaram moots financial support for small scale sector

Online edition of India's National Newspaper
Sunday, Mar 31, 2002

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Chidambaram moots financial support for small scale sector

By Our Special Correspondent

CHENNAI MARCH 30. The risks to indigenous manufacturers, including artisans and small-scale industry, arising from globalisation, have to be tackled through customs duty protection and support by way of finance, which alone promised a way out of mass poverty, and not by resisting globalisation, the former Union Minister of Finance and Commerce, P.Chidambaram, said here today.

If there was one lesson to be learnt from the collapse of the communist and socialist system, it was that no economic model that went against ``the human nature of expecting reward commensurate with contribution'' would deliver economic growth, employment and better quality of life for the masses of the people, Mr. Chidambaram said here today.

Addressing a meeting organised by the Thinkers' Association, he said India had no option but to follow the international trend of encouraging competition, treating imports and exports as ``two sides of a coin'' and recognising the undeniability of comparative advantage of nations in select lines of production or services.

Foreign direct investment (FDI) was necessary to bridge the ``savings gap, technology gap and management gap'' as a means of achieving economic growth of seven to eight per cent.

The low rate of growth witnessed till the 1990s had benefited the middle classes at the cost of the poor, he said.

Mentioning sectors such as petroleum-refining, industrial fabrics, bicycles and two-wheeler automobiles where the scale of production in India was comparable and competitive on a global basis, Mr. Chidambaram said that among risks from globalisation was the possibility of Indian enterprises being taken over by foreigners. This had to be tackled by dealing with a situation where bankers were hesitant to support Indian enterprises for fear of prosecution under ``vigilance'' for taking commercial decisions and inevitable risks.

To reduce the risk of India losing its high-quality human resources to developed countries, proper opportunities and environment should be created to retain talent, he added.

Mr. Chidambaram said that criticism of reduction of interest rates was "unjustified" and was based on a long history of high inflation, when nominal rates were high. With average inflation coming down sharply, the interest rates would have to fall commensurately to avoid inflation, which was the ``harshest form of taxation of the poor''.

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