Sinha hopes energy, transport outlay will fuel growth
Finance Minister Yashwant Sinha today announced several measures to revive the economy and to strengthen its foundations to deal effectively with an inherently uncertain external environment.
Presenting the Budget for 1998-99 in the Lok Sabha, Sinha said it is aimed at calibrating the pace and character of integration with the world economy, while strengthening India's international economic position through revival of exports and reduced reliance on borrowed funds.
The plan outlay for the key infrastructure sectors of energy, transport and communications has been raised by 35 per cent to Rs 611.46 billion for the current year from Rs 452.52 billion in 1997-98. The finance minister hoped this step would trigger industrial activity and revive rapid economic growth. The total plan
outlay for the ministry of power has been increased to Rs 95 billion as against Rs 67.38 billion in 1997-98.
The government would evolve a guarantee scheme to cover the large outstanding dues from state electricity boards to major public sector undertakings such as NTPC and Coal India. These outstanding
dues of about Rs 100 billion are serious impediments to investment by these public sector undertakings. The finance minister said that on the strength of the proposed guarantees, the PSUs would be able
to raise resources either by securitising these debts or directly entering the market for tapping resources. Sinha hoped that the resulting investment would also boost industrial growth through linkage effects.
He has provided Rs five billion for the National Highways Authority of India to catalyse new road projects including four-laning of existing national highways. He said the country needs to build more roads and their quality.
The finance minister has also proposed some flexibility in the investment pattern of provident funds by allowing up to 10 per cent of the new accretion to provident funds to be invested in private sector securities which have an investment grade rating from at least two credit rating agencies.
Sinha announced that enhanced powers would be delegated to bank managers of specialised SSI branches to ensure that most credit proposals are decided at the branch level itself. Moreover, to ease the flow of bank credit to small scale industries, the finance minister announced a raise of the aggregate working capital requirements to Rs 40 million from the present Rs two million. The working capital limit is determined by the banks on the basis of a simple calculation of 20 per cent of their annual turnover.
The benefit of lower spreads over the prime lending rate would be accorded to SSIs units with a good track record to moderate the cost of credit to such units. The finance minister would also advise the Reserve Bank of India to strengthen the existing mechanisms available to SSIs for discounting of bills to tackle the problem of delays in the settlement of their dues from larger companies. The RBI will also modify its guidelines to commercial banks on credit appraisal to give greater weight to the amount of overdue
outstandings that large units have.
The government has decided to delicense coal and lignite and petroleum products. Announcing this, the finance minister said that the bureaucratic and procedural hurdles must be minimised and an investor-friendly environment should be created. He said the government has initiated a dialogue with the states to explore the consolidation of regulatory legislation relating to industry in carrying out the necessary inspection in the least burdensome way.He emphasised that industrial deregulation would remain incomplete without reducing the burdens imposed by the ''inspector raj''.
Budget '98
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