Montek warns against reforms letup

Montek warns against reforms letup
The Economic Times, November 5, 2009, Page 10

Our Bureau NEW DELHI

AKEY policymaker on Wednesday warned against reconsidering financial sector reforms in the wake of the global meltdown, saying the gradual measures taken by the country to open up its financial sector would not lead to any instability.

“It would be an extremely serious mistake to stop financial sector reforms only because there is a global economic crisis,” Planning Commission deputy chairman Montek Singh Ahluwalia has said.

Mr Ahluwalia, a close aide to the prime minister, also made a strong pitch for aggressive disinvestment of public sector undertakings (PSUs) and said the proceeds from the sale should be used for new investment projects.

Speaking at the Economic Editors’ Conference, Mr Ahluwalia said that if the world wants to invest in India, it was a good thing. “I think we can absorb those foreign investment flows. Obviously we will remain watchful on flows of short-term debt and so on, but a revival of foreign investment flows is very welcome,” he said.

Foreign direct investment in the first half of the 2009-10 (April-September) stood at over $15 billion, almost equivalent to portfolio investments in the same period.

The deputy chairman’s comment is significant given the ongoing debate in the government on the pace of economic reforms in the back-drop of the global financial melt-down that affected the more liberalised Western world more than the relatively conservative economies like India.

The Planning Commission also wants the government’s disinvestment drive to pick up pace. “First of all we should be aggressive and secondly it (proceeds from disinvestment) should be used for new investment,” Mr Ahluwalia told reporters.

When asked whether the disinvestment proceeds should be used for reining in fiscal deficit which is expected to increase to 6.8% of the GDP next year, he said that it was for the finance ministry to decide as the modalities for expediting disinvestment and utilising the proceeds in new projects are to be developed by them.

The government has already reduced its shareholding in PSUs, including Oil India Limited and NHPC, this fiscal through disinvestment.

Disinvestment of NTPC, Sutluj Jal Vidyut Nigam and Rural Electrification Corporation is in the pipeline.

On the issue of rising food prices, Mr Ahluwalia said that the government was concerned about it because if price rise went out of control, it would affect the common man. He said that with prospects of a good rabi crop, food price inflation was expected to come down.

The deputy chairman added that while it was important to keep food prices down, farmers must also get good prices. “The fact that the government has given attractive procurement prices is something positive as it lays the foundation of strong agriculture performance,” he said.