Front Page
Sinha stresses need to tackle fiscal crisis
By Sushma Ramachandran
NEW DELHI, DEC. 2. Outlining priorities in economic policies in the run-up to the Budget, the Finance Minister, Mr. Yashwant Sinha, today highlighted the need to tackle the serious fiscal crisis, to deepen reforms in agriculture and to reduce import tariffs to Asian levels.
On the revenue side, he pointed to the need to make up for the slow or negative growth in customs tariff by direct taxes. These needed to be brought to around 10 per cent of the gross domestic product (GDP) over the next few years from the existing level of 3.4.
Inaugurating the annual India Economic Summit organised by the World Economic Forum and the Confederation of Indian Industry, Mr. Sinha mentioned six areas which would be the focus of the country's economic policy efforts. These include agricultural liberalisation, improving regulatory capacity in the financial sector, resolving the fiscal crisis, improving the tax to GDP ratio, reducing import tariffs and raising literacy levels, along with the setting up of a formal pension system.
Over 400 delegates from 28 countries are participating in the conference; such a positive response was not expected because of travel fears after the September 11 attacks. In view of the need to boost the confidence of foreign investors, the Prime Minister, Mr. Atal Behari Vajpayee, who could not attend, sent a special message stressing that the Indian economy would grow faster than five per cent - despite the global slowdown - owing to accelerated implementation of reforms.
Mr. Sinha emphasised that the second half of the current fiscal would show better economic growth than the first. He also sought to dispel the perception that the implementation of the ``well received'' 2001-2 budget had faltered. Stressing that reforms were very much on course, he said a monitoring mechanism was in place to keep track of implementation of budget proposals. He promised to come back to the nation with an ``action taken report'' for these announcements while presenting the next budget.
On the agricultural sector, he noted that the liberalisation process had had a relatively little impact with numerous impediments continuing on price flexibility, movement of goods and international trade. ``We have yet to build modern market institutions which can support a market-oriented agricultural sector.''
The fiscal crisis was particularly harmful as it was crowding out the capability to spend public resources to produce goods and improve governance. On the revenue side, the tax to GDP ratio was still far below the level needed to produce public goods on an acceptable scale. Full migration to value-added tax (VAT) was yet to be made. On the expenditure side, he felt enormous resources were being spent on subsidies and transfers to special interest groups, which should instead be directed to produce public goods and sound governance.
In the financial sector, Mr. Sinha said regulatory capacity to forestall episodes of market misconduct and swift enforcement of laws had to be improved. The banking systems also faced the onerous challenge of moving away from the traditional government-dominated system. A large number of under-capitalised banks had to be grappled with. ``We have to chart a course to safe and sound banking while minimising the claims on public resources.''
On the social sector, he said there had been a strong improvement in literacy over the past decade but the country still faced low literacy and high infant mortality levels. ``These are daunting challenges but I am completely convinced they are not insurmountable ones.''
Referring to the focus on seven per cent growth, he pointed out that growth at this rate for a decade would lead to doubling of output. This would further lead to a reduction of the poverty rate to five per cent and bring 200 million people out of poverty, an event of historic significance.
Send this article to Friends by
E-Mail
Front Page
|
