A mechanism is being evolved for each company that is to be divested and government would approach the market with these issues to buoy investor sentiment, he told reporters here.

"A lot of people have said the stock market is looking forward to a spate of good issues. Many of these companies would be seen as high quality scrips... We would like to combine sale to domestic and foreign institutions with a retail offering," Ahluwalia said.

Emphasising that July and August were not the right times of the year to hit the market, the finance secretary said the government could consider the domestic offering at a discount, especially to individuals, but clarified that for this priorapproval would be necessary.

Singh told reporters on the sidelines of the Euromoney Conference here that apart from the disinvestment, strategic sale of five PSUs was also under consideration, though it was not under direct supervision of the finance ministry. On the likely process of disinvestment in domestic markets, Ahluwalia said for institutional investors government might go through the book building process.

Under the book-building process each institution offers a price and quantity it intends to purchase.

The finance secretary said, disinvestment would be combination of domestic issue and global depository receipts (GDRs). The retail investor should also get some chance to investment in good quality issues, he said adding government might offer individual investors shares at a discount from prices prevailing at the time of disinvesment.

``By offering these scrips at discount, confidence of small investors can be brought back and the ailing primary market revived,''Ahluwalia added. He saidthe fundamentals of these four companies are good and are likely to get a good response from both local and foreign investors.

Earlier in the day while speaking at the Euromoney conference he dispelled fears about the economy getting affected as a result of sanctions, finance secretary Montek Singh Ahluwalia said that the impact of sanctions in the current year would be negligible as funds already approved for projects will not be blocked. Sanctions can only hurt if they stay for a long period, he said.As the US banks will continue to lend to the Indian private industry, the government does not anticipate major blockages in finance for the private sector, he said. Foreign banks are not lenders to the government, hence this source of finance will stay open for private Indian industry, he added.

Others speaking at the conference also held similar views. Former RBI governor asked the foreign investors to be their own credit agencies. He said this while referring to the recent decision of the Moody'sInvestor Services to lower India's credit rating. Although the issues relating to sanctions and Moody's downgrading dominated the conference, the speakers felt that these should not have any significant impact in garnering private foreign capital needed for development of infrastructure sector.

Ahluwalia, in his speech pointed out that official flows in the form of bilateral aid have been declining as a percentage of private capital hence the impact of restrictions in bilateral aid should not be overestimated. Increasingly the country has to depend on capital on foreign direct investment, portfolio investments and foreign borrowings, in such a scenario the relative importance of official flows is on the decline, he underscored. Problems on the exchange front and a sustained bearish sentiment in the stock exchange cannot be attributed to sanctions, the finance secretary said. The external environment has deteriorated all over South-East Asia and India cannot remain isolated from the effect on its immediateenvironment, he said.

The rupee has been volatile but compared to the yen and east Asian currencies the rupee has stayed in better health, he said. The fact that India has withstood the impact of the South East Asian crisis needs to be appreciated, he underscored.

In a difficult external environment the challenge before the country is to take growth back to seven per cent from a level of 5.5 per cent in 1997-98, he said. This can be done if infrastructure is improved, he said. Building infrastructure is proving to be one of the biggest challenges before the government as new problems are coming up, problems which the government has not been in a position to anticipate, he elaborated. The entry of private operators in infrastructure has thrown up problems of regulation, of interfacing with government, of a level-playing-field between the private operators and the government, these are knotty issues to which there are no easy answers, he said. Solving these problems involves modifying the terms of licences.It is not easy for the government to be nimble footed on these issues, he said.

The other challenge before the government lies in improving exports which dropped to register a two per cent growth in 1997-98. Exports have to be improved by allowing greater competition and by opening areas to the flow of newer technologies, he said. Exports cannot be improved by tinkering with subsidies any more, an industrial structure must be put in place which will promote the pursuit of quality, he said.

Taking a dig at Moody's which has downgraded India by two notches, the finance secretary said, "Moody's has been wrong before and I hope they are wrong again." India has to be viewed in the context of other South East Asin countries which have been downgraded by four to six notches, he said.

Insight -- genesis of the problem

Private capital flows are increasing while official bilateral aid flows are declining. It does not make sense to exaggerate the impact of sanctions on the Indian economy. The financesecretary is thus right in shifting attention to the problem area: infrastructure. But clearance to 5000 MW of private power projects is no big deal. India needs mega investment in roads, ports, power telecom and new export-competitive industries.

The issue then is one of accelerating foreign direct investment. But as admitted by the finance secretary, the government has yet to tackle what are described as `unanticipated' problems of interface with the private sector, of setting up regulatory procedures and of securing a level-playing-field.

The slow pace of resolving these problems renders the promise of doubling annual FDI investment in two years overambitious.