On fiscal deficit

The unlimited borrowing by the Government and the runaway increase in subsidies and non-plan expenditure could lead to crowding out of credit/investment needs of industries and to other undesirable consequences. Placement of a ceiling on public debt will be a welcome step. Fiscal responsibility legislations and the reform package for more transparency and accountability as attempted by New Zealand are worth emulating. The fiscal deficit should be brought under 4 per cent by increasing revenue and curtailing expenditure, so that India may command the respect of developed countries, and overseas Indian/foreign investors will find India an attractive destination.

On Subsidies

Some of the social welfare and sector-wise (say, agriculture) subsidies madeavailable in developed countries will make them appear as following socialist principles, although they believe in a free-market economy and capitalism. There is nothing wrong in providing subsidies to benefit certain neglected sections of the society. It is, however, advisable to provide subsidies to targeted groups without making them available to all categories. For eaxmple, the general subsidy applicable to fertilisers can be withdrawn. While the affluent farmers could be made to pay for the fertilisers at prices dictated by the market, the smaller/marginal farmers might be supplied fertiliser at a concessional rate.

On PSU disinvestment

The disinvestment exercise in India has been devised to meet the fiscal deficit and not to tackle the problem of public-sector units (PSUs) in terms of their restructuring and functioning with global efficiency. With widespread public ownership, UK PSUs have achieved improvement in efficiency profitability and competitiveness. The experience of overseas Indiansand foreign investors who are knowledgeable in market economy may be used to make the public undertakings more viable through disinvestment.

On financial sector reforms

Privatisation of public-sector banks will improve their efficiency and facilitate their reaching global standards of performance. The sector will run into serious difficulties if adequate attention is not paid to recovery of non-performing assets. It has been recognised that the Indian banking system today works under the burden of several archaic laws regarding transfer of and transaction in properties and financial instruments. Unless proper legal amendments are carried out in conformity with modern financial and banking practices, viability of banking institutions will be seriously impaired.

As regards opening up of the insurance sector, overseas Indians were expecting that they would get 14 per cent exclusive equity participation, in addition to 26 per cent reserved for a foreign collaborator. Total foreign investment is nowsought to be restricted to 26 per cent. In the banking sector, 40 per cent foreign equity is permitted, inclusive of NRI investment. Similar concessions may be extended to the insurance sector also for the participation of overseas Indians.

On WTO commitments

It has been suggested in some quarters that India should lead the alliance of developing countries to influence the course of the Millennium Round, but similar efforts in the Uruguay Round did not produce much impact. Developing countries found it more profitable to have regional alliances with the developed countries.

While India need not oppose discussion on new trade issues, its focus should be on a review of the earlier agreement on items like anti-dumping, subsidies, countervailing measures, etc, so that its tendentious interpretation is not used to block developing countries' access to the developed market.

On tax reforms

Lowering of taxes has resulted in more tax revenue for the Government through increase in the taxpayers' base and larger compliance. Taxing a few at high rates had resulted in black-money generation and parallel economy in India, and it is better avoided. Rich agriculturists should be brought under the tax net. Efforts should be made to build a consensus on a single VAT regimen.

On defence

Money should not be a constraint for our defence preparedness. The expenditure as a percentage of GDP need not be as high as that of Pakistan but it should be reasonable enough to enable our forces to equip themselves with the latest weaponry and defence systems.

On Centre-state relations

In our fiscal federalism, there are certain constraints, and unless there are drastic changes in the tax-administration system, it may not be possible to decentralise the fiscal responsibility. The changes needed can, however, be studied by the Finance Commission for being introduced wherever possible.

On small scale sector

The small-scale sector has played a useful role in expanding our industrialbase, increasing employment and augmenting exports. The expansion of this sector is not dependant on reservation, but the constraint on its growth like a ceiling on investment, non-availability of cheap resources, etc should be removed.

On infrastructure

Infrastructure expenditure should be recovered from the users in an equitable manner. There could be a differential pricing system for use of electricity, water, etc for rich agriculturists, and marginal and small farmers. There should not be any problem in raising resources from abroad if India could be seen as a country where there is a high degree of protection on foreign investment and absence of contractual violation and corrupt practices.

On social sector

Rationalisation of implicit and explicit subsidies will result in more funds being available for the social sector. Overseas Indians also can organise infrastructure development funds from their host countries, with participation from themselves, the host country's government andbusiness community for investment in infrastructure projects in India. It can be made a condition that the infrastructure development fund should invest 10-15 per cent in a state towards socially desirable projects like education, health, supply of drinking water, sanitation, etc.

On corporate sector

The globalisation process has invested a lot of responsibility on the corporate sector. Globalisation means greater competition, and Indian industry should be more competitive. It must become more quality conscious and aware of global standards. Rules of Indian business should become closer to those of developed countries. While every effort should be made to revive industries through cost-reduction and improvement in technology, laws should not be used for avoiding closure of unviable units.

On agriculture

A partnership between the government, agriculture and food industry is necessary to create a modern integrated food chain for enhancing production, augmenting income of farmers, andincreasing employment. Large retailers will be the key drivers of change in India. The administration of food law needs to be streamlined. The responsibilities are now divided between a large number of different ministries and departments, and the matter gets compounded, as agriculture is technically a state subject and local administraetion is under the control of the agriculture ministry of the states. The diffusion of responsibility has to be changed, and there should be more focused implementation of reforms.

On labour

A rigid social-security structure in Europe has made it lag behind the US in economic growth. The unemployment level has come down, and productivity has gone up in the US because of its flexible labour policies. The growth of the service sector had taken care of the job losses in the manufacturing sector. India should also focus on the service industry and food-processing sector, so that labour redundancy elsewhere does not pose a serious problem.