The Hindu : Sinha leaves as economy looks up

Online edition of India's National Newspaper
Tuesday, Jul 02, 2002

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Sinha leaves as economy looks up

By Alok Mukherjee

NEW DELHI JULY 1. Ironically, the much-maligned Finance Minister, Yashwant Sinha, today bowed out of office when most economic indicators point to an upswing in the economy.

While the latest data from the Central Statistical Organisation (CSO) says that there was a growth rate of 5.4 per cent during the last fiscal year, the Reserve Bank of India has reported that the economy clocked a current account surplus of nearly Rs. 7,000 crores in the last fiscal compared to a deficit of Rs. 11,431 crores the previous year. The foreign exchange reserves are also at a record level of around $ 57 billion, a far cry from the 1990-91 figures when Mr. Sinha, as Finance Minister in the Chandrashekhar Government, left behind reserves of just about $1 billion in June 1991.

Mr. Sinha also leaves a growing economy for his successor, Jaswant Singh. The CSO figures again reveal that the last two quarters of the 2001-02 fiscal year have recorded growth rates of 6.2 and 6.4 per cent with the primary and tertiary sectors recording growth over 7.5 per cent. Pick up in investments and revival of the stock markets are also on the cards with reports of over Rs. 30,000 crores worth of public issues being planned by companies in the coming weeks.

The price situation is also under control with point-to-point inflation rate registering a historic low of 1.63 per cent at the end of 2001-02 fiscal. The 52-week average inflation rate had also dropped to 3.61 per cent at the end of that year.

These inflation rates reflect the relative price stability in food and manufactured products throughout last year, barring edible oils, which shot up in line with international trends. The current year is also expected to be a low inflation year since high degree of volatility in food prices is unlikely because of huge official stocks. The only worrisome factor is in the case of international crude oil prices, something over which the Finance Minister has little control.

Mr. Sinha has, of course, left behind a smouldering middle class whose returns on investments and faith in official financial institutions have taken a battering.

But, apart from a crack down on corruption, the new Finance Minister is unlikely to do much about the declining deposit rates since no major change in Government policy is envisaged with the change of guard at North Block. In fact, Mr. Singh is known to be a firm believer in liberalisation and is expected to push the reforms agenda harder.

The fiscal mess at the Centre and the States is another major item pending on the agenda of Mr. Singh but that is something which has to be achieved over a period of time.

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