FM holds out hope for economic recovery

FM holds out hope for economic recovery
The Times of India, July 15, 2009, Page 15

Pranab Says India Will Be Back On Track, Promises To Target Investment In ‘Quick Yield’ Areas

TIMES NEWS NETWORK

New Delhi: In his cautious manner, finance minister Pranab Mukherjee held out some hope for the economy. He told the Lok Sabha on Tuesday afternoon that a “silver lining is visible” and promised he would target investment in “quick yield” areas to get India back on the growth path.

He said there was a medium-term strategy to tap sectors of the economy where returns would be swifter. In what could be a bid to counter the impression that he might be too much of a “by-the-book-Benny” at a time when quick responses were needed, he made it clear that he would not be bogged down by the “process” and lose sight of the larger picture.

On Tuesday, when the Lok Sabha passed the general budget, Mukherjee promised to push for the rollout of GST next year and sought the cooperation of all major parties that are in power in various states. He declared his intention to pay due attention to returning to FRBM targets, seeking to assuage fears that borrow-and-spend was a permanent feature.

Mukherjee was not gungho. If Congress MPs were looking for a rousing speech, they were to be disappointed. He could well have depended on private sector to spur growth as “it was simpler to choose the softer option” of not crossing the fiscal red lines. But then, who would provide for the “teeming millions”, he asked pointing to UPA’s promise to provide the “bare minimum to the most needy”.

Having clearly followed comment and opinion closely, he pointed to criticism that he had presented an “accountant’s budget”. It was easy to fling about such epithets yet it required an act of courage to go in for a borrowing of Rs 3,91,000 crore. “It is not an easy task to borrow,” he said, indicating his concern by saying he was praying fervently to “Lord Indra” for a good monsoon.

It was growth alone that led to a rise in the tax-GDP ratios in the previous years and allowed the government to come out with ambitious schemes like the nation-wide loan waiver. The government was determined to make social investments and Mukherjee hoped that “signs of a pick up” in sectors like steel, cement, autos and telecom would remain on course. “These are small beginnings, we are not out of the woods,” he said.

Predictably, there were no giveaways on offer. Having outlined UPA’s commitments, he said the Budget was a “fourth” stimulus since last September though his current offering was mainly by way of spending plans. In deference to the market, he acknowledged that there might have been some sense of disappointment over his muted stance on disinvestment. He sought to send out a reforms signal by saying that his “so-called” silence had been misinterpreted.

A list of PSUs where government would issue fresh equity would soon be out. He did not elaborate just as he spoke of the importance of regulating capital flows to make the financial sector more “competitive” without spelling out plans for pending insurance, banking and pension legislation. He spoke of the need for efficient regulatory frameworks in order to protect India’s banks and financial markets against volatile capital flows.