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| Saturday, 29 May 2004 |
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Road map for India: Reforms to be tilted to spread and deepen rural prosperity NEW DELHI, Friday (AFP) India's new left-leaning government, announcing its roadmap for Asia's third-biggest economy, said it was committed to reform "with a human face" and would aim for seven to eight percent annual growth. The document said reforms would be tilted mainly toward "spreading and deepening rural prosperity" in the agriculture-dependent nation and making a "tangible difference" in the lives of ordinary citizens, who are seen as having handed the government its upset win this month over the Hindu nationalists. While the 20-party communist-backed coalition, known as the United Progressive Alliance, excluded the sale of profitable state firms, it promised to "unleash the creative energies" of entrepreneurs and said it planned major tax changes to raise funds. Prime Minister Manmohan Singh, dubbed India's financial "liberator" for opening up its Soviet-style state-directed economy as finance minister in the early 1990s, said the government would seek to achieve "sustainable" seven to eight per cent growth over the next decade. The paper, entitled the Common Minimum Programme and geared to improving the welfare of India's neediest through better education, health care and higher incomes, was keenly awaited by nervous markets, although much of its contents was flagged in advance. The document, which will serve as the bedrock document for the government's five-year term, reiterated the coalition's "abiding commitment to economic reform with a human face that stimulates growth, investment and employment". The government said it would pay special attention to boosting investment in the agriculture sector, on which around 65 percent of Indians depend for a living. Right now, only around seven percent of 125 billion dollars in annual public and private investment goes to agriculture. The government said it would seek foreign investment in infrastructure, high tech and other areas but there would be no more sales of the "nine gems" - the profitable state-run giants in key sectors such as energy. As part of its pledge, it said it would abolish the disinvestment ministry. Such a move was sought by its communist allies. The alliance with 217 lawmakers in the 543-seat elected lower house depends on the communists to survive. However, it did leave profitable state companies leeway to tap capital markets for funds as long as the government kept 51 percent control and said the sale of loss-making firms would be examined individually. Analysts were sceptical that the government could achieve its ambitious programme without borrowing more and raising India's fiscal deficit. "Two things they will need very badly," said D.H. Pai Panandikar, economist at RPG Foundation, a New Delhi think-tank. "A second term to implement all this and the resources which don't seem to be in sight at the moment." At the same, analysts said that if the government managed to improve rural incomes it would boost industrial demand, which in turn would help growth. Singh said the document, thrashed out after marathon talks among the allies, was the result of "give and take... reflecting the needs of our time". Also, the government said it was "deeply committed" to developing India's capital markets. Foreign investment would "continue to be encouraged". Singh said the government's seven-to-eight percent growth target reflected "realism that is very necessary", adding: "We will try to improve on this." The economy was forecast to grow by 8.1 percent for the year to March 2004. "What's crucial is the budget (next month), when we'll know whether the new government continues with reforms," said Prakash Lala, managing director at Centaur Securities. "We have to see ... how the fiscal deficit is controlled." While the government recognised some changes to India's rigid labour laws were needed to take into account economic cycles and employer needs, it rejected the idea of "automatic hire and fire". "Such changes must fully protect the interests of workers and families and be taken in consultation with unions," the document said. In a bid to raise revenues to fund what Singh has said will involve "massive investments", the document promised major tax reforms including a value added tax and widening the tax base in a country where tax evasion is rife. |
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