Manmohan demands probe into UTI muddle

By Our Staff Reporter

BANGALORE, JULY 11. The Leader of the Opposition in the Rajya Sabha, Dr. Manmohan Singh, on Wednesday urged the Centre to order an independent inquiry into the UTI muddle in its flagship scheme - US-64. He said the Government could not wash its hands of the matter.

Speaking to presspersons on the sidelines of a national seminar on public finances here, the Congress leader said he was not ready to either blame or absolve the Union Finance Minister, Mr. Yashwant Sinha, for India's largest mutual fund disaster. Both the Government and the UTI were responsible for the mess.

Dr. Singh said: ``It is not proper on my part to comment on my successor's role. I am not absolving anybody now nor am I fixing any responsibility.'' About the reported nexus between the top brokerage houses and the UTI in the mutual fund investing in select stocks, he said, ``obviously, something has gone wrong.''

A mechanism was necessary to restore investors' confidence, because the UTI was the largest mutual fund and small investors used to be told not to go directly to the stock market but invest in mutual funds. Now that the biggest mutual fund had gone under, it would shake people's faith in the entire mutual fund industry. It would have implications for the stock markets and the Government and the UTI management should find some way out.

The UTI and other mutual funds should be brought under Securities and Exchange Board of India. The UTI's problems had been identified by the Deepak Parekh Committee and if its recommendations were implemented, this situation would not have arisen. Mr. Sinha had raised the issue of insider trading.

Dr. Singh said the economy was not in good shape, and the growth rate projections had been revised to 5.2 per cent from 6 per cent. The tax revenues projected in the budget were nowhere in sight. In the first two months, these revenues were lower than what they were in the corresponding period last year.

The Centre, he said, should come out with a statement. Then alone could it come up with a sensible diagnosis and prescription. The Government was trying to sweep the issues under the carpet, but this was not the way to manage a complex economy like India's, Dr. Singh said.

``We have to recognise that China will be part of the world trade system. All major countries, the European Union and the U.S. have agreed to bring China in. We should be prepared for more competition internationally and in our domestic market. This Government has to prepare our industry to face the competition much more effectively,'' he said.

While suggesting that the domestic economy should be strengthened, he said the reforms or liberalisation was not a device to de- industrialise, but to strengthen industry.

With the Congress not being in power in the last four years, the growth rate of economy had slipped. Savings had reached a peak in 1995 and industrial growth had touched a new high during that period. One could compare what had happened since then, he said.

Hasty adoption will harm reforms

Touching upon the VAT, Dr. Singh, urged the State Governments to make proper preparations before implementing VAT from April 1, 2002 as any hasty action would harm the reforms process.

He said the States should modernise their tax system. In the next five years, they should raise their tax GDP ratio, stagnating for the past 20 years, at least by 1 to 1.5 per cent.

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