The slew of policy announcements in recent weeks have been implemented more by “stealth than by design,” said a senior economist on Friday. Speaking at a seminar on economic reforms, organised by the Bangalore Chamber of Industry and Commerce, M. Govinda Rao, Member of the Prime Minister’s Economic Advisory Council, said the recent measures, especially those related to relaxation of controls on foreign direct investment (FDI), “are more symbolic than real.” Dr. Rao, who is also Director, National Institute of Public Finance and Policy, said Indian industry, which had been gloating on the country’s “economic fundamentals” just a few months ago, no longer talks about them. “The serious deceleration of growth, coupled with high inflation, is only part of the problem,” he said. The decline in value of the rupee, the “fast depletion” of foreign exchange reserves, and the widening current account and fiscal deficits were an indication of a deeper malaise, he argued. He blamed sections of industry that acted as “vested interests” in their approach to the reform agenda. “Industry has failed to adopt a systematic approach to reforms,” he said.
“Where is the money for private investment,” asked Dr. Rao, referring to the decline in household savings as well as savings by foreign entities in India. The current account deficit is about 4 per cent of gross domestic product, about the same level as in 1991, when the country faced a major crisis. “The only consolation is that we now have foreign exchange reserves of over $200 billion, but that can vanish in no time,” he observed. The “massive” gold imports, he said was because of the negative real returns on financial savings by households.
Dr. Rao said the “so-called” public private partnerships (PPP), which are meant to ensure that risks are shared, have failed to take off because the private companies are “unwilling to take risks.”
Disagreeing with the recent report of the Parthasarathi Shome committee on General Anti-Avoidance Rules (GAAR), Dr. Rao said “Retrospective changes in tax laws are not right, but to say that we will permit tax evasion and the use of tax havens is just not right.”
Keywords: FDI, Indian economy
The currency of a nation, has no real value, perhaps. It is a facility
for the people of that nation to buy goods and services. There is no
gold standard, nor any standard, for the value of currency. We must
perhaps keep this in mind. When we talk about corruption, we are saying,
usually, that people are appropriating these funds, represented by
currency, and that the currency has not been used, and these people, who
are 'corrupt', will not use the currency, perhaps.
The professor’s concerns need heed. Private sector needs to put its
best foot forward. That our household savings are down is worrisome.
Govt. is anxious to liberalise insurance norms even as private
insurers have closed down 300 branches. A western study of lakh
projects from 50 donors to 170-countries during 1970-2001 classified
projects as good, indifferent, dirty generally and dirty positively.A
desi example. Giving a project to Dow after 25 years of Bhopal for to
research in poisonous gases is pretty dirty if we sue this
classification. People fear is that in the name of infra projects the
nation will be rendered bankrupt in the next decade. See the
monumental projects being aired lightly. A bullet train from
Thiruvananthapuram to Kasargode at an outlay of Rs.1,75,000 crore and
from CST Mumbai to Nagpur at Rs.1,60,000 crore. NIB will only speed
this up.
Please Email the Editor