COMMENTARY
INTERVIEWS
SPECIALS
CHAT
ARCHIVES

FM favours privatisation of public sector banks, time-frame to tackle revenue deficit

Finance Minister Yashwant Sinha (the Bharatiya Janata Party) and leaders of the Indian National Congress and the Communist Party of India (Marxist) today agreed to evolve a political consensus on crucial economic issues like containing fiscal defict, subsidy, user costs and even tax on rural rich.

They spoke at a seminar organised in New Delhi by the Federation of Indian Chamber of Commerce and Industry. Among the luminaries were senior Congress leader and former finance minister Pranab Mukherjee and CPI-M Politburo member Sitaram Yechuri.

The finance minister wanted a consensus on the financial sector reforms. The areas crying out for a political agreement include the insurance sector and banking. ''Left to myself, I feel that even the public sector banks should be privatised,'' Sinha said, adding that this was his personal view and not necessarily of either the government or his party.

Sinha said check on revenue and fiscal deficits was the most critical aspect. While the revenue deficit should be brought down to zero, fiscal deficit could at the most go up to two per cent, which again should be used for productive purposes. ''We should agree on a time-frame to remove the revenue deficit,'' Sinha said. If fiscal deficit was allowed to exceed beyond six per cent, the country would be pushed into an internal debt trap, he added.

Sinha said the Centre may help the states overcome financial crisis, but structural issues have to be tackled by the states themselves.

Mukherjee and Yechuri endorsed the idea of fiscal discipline but pointed the ground level difficulties in achieving the objective. They raised the question of raising resources while attempting to bring in financial discipline. Mukherjee suggested that the institutional mechanism like the National Development Council should be made more enforceable.

On the question of subsidy, there was a broad consensus between Sinha, Mukherjee and Yechuri. They all wanted the subsidies to be better targetted as bulk of the subsidies were cornered by those not requiring them. Yechuri pointed to the ''absurd anamolies'' in the system.

Sinha warned that the revenue expenditure could not be controlled unless user charges for electricity, water and subsidies were not checked and better targetted. He admitted that the government are compelled to conceal subsidies in the form of various concessions so that they do not face political criticism.

Mukherjee said broad areas of agreement on the subsidy issues could be worked out and the points of disagreement could be left aside.

On the question of labour reforms, the three leaders unanimously rejected the industry demand for hiring and firing. They argued that any comparison with either developed nations or China would be misplaced since there was a strong safety mechanism in those countries.

Yechuri talked about the insurance cover for employees borne by employers in China for risk against losing employment. ''Here we do not have any safety net,'' he said.

Sinha said he would welcome the debate on whether to bring the rural rich in the tax net. Sinha made this remark after Yechuri argued for widening the base with bringing the rural rich in the tax net. He agreed with Yechuri that a vast rural demand could be created by introducing land reforms and improving the lot of the rural people.

However, CPI leader and former agricultural minister Chaturanan Mishra rejected this argument and blamed the industry for high level of fiscal deficit. He said as Rs 500 billion was locked in excise and other tax litigation, if the industry cooperated to settle these disputes expeditiously, much of the fiscal problems could be tackled.

Sinha highlighted the need to evolve a political consensus over the national competition policy. The demand for protection to the domestic industry could be considered for a period of time but it could not extend to indefinite period. He also wanted the industry to be more responsible and ensure better corporate governance. The industry must ensure shareholders' value and should drop the habit of running to the government for all and sundry problems.

UNI

Business news