"The tools we have at our disposal to manage it are less effective as the traditional command and control techniques give way to market mechanisms. The new economy will need to manage expectations," said Bombay Chamber of Commerce president RK Pitamber.
Infrastructural Development Finance Company deputy managing director Nasser Munjee said that apart from efficient public spending, higher private investment is of utmost importance to revive the economy.
``With appropriate instruments, we can raise our resources to fund our own development,'' he said. Among the short-term strategies, the chamber has suggested that the Chelliah Committee report should be implemented:
There should be infrastructure investment reforms to create a framework for privatisation, especially delineating the transparency of the bidding process, property rights of all the players, returns to the operators, redressal in case of defaults and establishing a well-defined regulatory mechanism.As its medium-term strategy, the chamber has said that a coherent policy between the state and the centre regarding finances must be spelt out. The amount of subsidy on any ad hoc activity thata state subsidises must be reduced from the centre's discretionary development fund.
As its long-term strategy, the chamber has suggested increase in the growth rate of gross domestic savings and investments, especially in infrastructure development.
It has also suggested creation of an integrated national market (removing the regional markets) without any barriers to inter-state movement of goods and setting up of a national mechanism for its implementation.
The chamber wants a big push for the housing and construction sector to generate the demands for steel, cement, construction equipment and generate employment.
The government needs to clearly identify an immediate strategy for stimulating the growth of industrial output by concentrating on sectors that have the highest multiplier effect, said the report.
While conditions were right for growth, expectations in the economy had already risen to unrealistic levels and were firmly focussed on a slow slide to lower levels of economicactivity.
Among the problem areas the chamber has said that, Government resources have been increasingly diverted to subsidies, for pay hikes in the public sector and for providing support to public sector utilities, it said.
The capital expenditure by the Government has been negligible, and the creation of over-capacities in industry leading to price wars and resultant cash flow problems have become the new economic realities.
``Interest rates, though lower could not be considered low by international comparison,'' the chamber has said.
The chamber has also suggested proper steps for improving industry sector, agricultural sector, service sector, public sector, and social sector. In the service sector it has listed industries like insurance, tourism, software which has a vast potential for employment generation.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
