Date:04/07/2009 URL: http://www.thehindu.com/2009/07/04/stories/2009070454650500.htm

Karnataka - Bangalore

Murthy cautions against total deregulation

Special Correspondent

— Photo: K. Gopinathan

SHARING THOUGHTS: J. Crasta, FKCCI president, and M. Srinivasa Murthy, Principal Secretary, Department of Finance, at a programme on ‘The Role of Economic Freedom in the Development of Karnataka’ in Bangalore on Friday.

Bangalore: More economic deregulation does not automatically result in economic development and meaningful economic freedom, said M.R. Sreenivasa Murthy, Principal Secretary, Finance Department.

He was speaking on the role of economic freedom in the economic development of Karnataka, at a workshop in the city on Friday organised by the Press Institute of India, the Friedrich-Naumann-Stiftung fur die Freiheit (FNF), a global organisation that advocates the expansion of “free markets”, and the Rajiv Gandhi Institute for Contemporary Studies (RGICS).

Presenting the results of the Economic Freedom Index for Indian States, P.D. Kaushik, Associate Director, RGICS, said State’s rank had slipped from sixth place in 2004 to 15th in 2006 among 20 States in India.

Karnataka, he said, had been an “under achiever” in the last few years. The index was based on an analysis of five parameters consisting of 26 data sets. In his response, Mr. Murthy said that the notion of economic freedom had to be country-specific, taking into account the needs of its people. India’s emphasis on self-reliance soon after Independence reflected the path of democratic socialism that the country adopted with its objective of achieving self-sufficiency in food and industrial commodities.

On the global financial crisis, he said there was a fair degree of consensus among economists that “inadequate regulation led to the crisis.”

Mr. Murthy contested the findings of the study, pointing out that Karnataka’s revenue mobilisation effort – at 11.5 per cent of the State’s Gross State Domestic Product (GSDP) – is among the best among all States of the Indian Union.

Fiscal reforms such as that the State must reduce revenue expenditures “cannot be applied blindly.” The Government had to administer, maintain law and order and run schools and hospitals and feed schoolchildren.