Addressing a seminar organised by the Federation of Indian Chambers of Commerce and Industry (FICCI) today on "Resurgence of Capital Market", he said investors were repeatedly being ruined by the fly-by-night operators and speculators. It is now the responsibility of market participants such as the Unit Trust of India, mutual funds, banks and insurance companies to play a defined role to bring back small investors confidence in the market, he said.

"Our main challenge in the government is to reduce the fiscal deficit to sustainable levels. Much of the sentiment that governs the market will be guided by how we manage the whole situation," he said.

"I am determined that not only should I do my best and make government do its best to restrain fiscal deficit this year, but also set targets that will lead tothe gradual reduction and final elimination of fiscal deficit," Sinha said. Consensus needed to be reached on this between government, trade industry and the people, he added.

The finance minister maintained that the financial institutions should reshuffle their holdings, cease to hold controlling stakes in companies and turn into portfolio investments institutions. This, according to him, would provide better returns to the investors and could help mobilise savings into the mutual funds.

Elaborating on the role of the regulator, Sinha admitted that a `ham-handed' approach will certainly create more problems than doing any good to the market. "A balanced, sensible, delicate touch is needed in order to regulate the markets," said Sinha. "A lot of responsibility devolves on the players, here I mean corporate governance. The corporate sector has also acted with less integrity," he added.

Interestingly, the finance minister stated that both the government and the corporates also needs to learn to adjust tothe forces of market. Sinha also expressed concern over the failure of the high rates of domestic savings not being channelised into the markets. He asked questions such as `Why are the markets in this shape ? Why are investors resorting to post office savings and not the markets ? In reply to his own questions, the finance minister highlighted a crucial aspect of the government and the corporates who have yet not been able to recreate the confidence of small investors. This, he said, had led to a loss of depth and breadth of the market with business concentrating at a few select counters.

Sinha also made a strong case for privatisation, which according to him could prove instrumental in reducing the fiscal deficit of the nation. "Much of the sentiments will be decided by how we manage the fiscal deficit," said Sinha.

"We cannot support unviable public sector units as well as reduce the fiscal deficit. For a handful of people we would be penalising the entire economy".

GAIL Disinvestment: Uniongovernment would meet its disinvestment target of Rs 5,000 crore by disinvesting its stake in the Gas Authority of India Ltd (GAIL) next month in the domestic market and might decide to take the GDR route for the Indian Oil Corporation (IOC) and Videsh Sanchar Nigam Ltd (VSNL)

Asked whether the subsequent disinvestments would also be in the domestic market, Sinha said "No. The government has not yet taken a decision."The government has so far managed to raise only about Rs 250 crore by divesting its stake in Container Corporation of India (Concor) in the domestic market.

Reminded about his assertions that the economy would be set right within six months after BJP came to power, Sinha said "the slowdown (which began in mid-1996) was much worse than I had imagined."

"We have now launched the second generation of reforms, which are much more difficult that what was done in the first generation," he said.

Sinha was non-committal on the Gross Domestic Product (GDP) growth for the current fiscal, merelystating that kharif production would be less than expected, but rabi crop would be good. "Despite natural calamities, it is quite clear that agriculture will provide the stimulus for growth for the rest of the fiscal," he said.