Greater Savings Must To Develop Core Sector, Says Montek

The next phase of economic reforms will target mobilisation of domestic savings through pension funds, provident funds, and health insurance, according to finance secretary Montek Singh Ahluwalia.

Ahluwalia said yesterday at the Corporate Conference organised in New Delhi by The Asia Society, Dow Jones and the Confederation of Indian Industry that it was imperative to improve the savings rate and release the required long-term funds necessary for resource mobilisation to fund the development of the infrastructure, which must see greater private sector participation.

Responding to the criticism that the government had yet to make concrete moves on disinvestment in public sector undertakings (PSUs), the finance secretary said: We have not embarked upon wholesale privatisation of the public sector. There is greater commercial autonomy needed in PSUs and the government must move out of some sectors.

Ahluwalia reiterated the governments commitment to disinvest up to 74 per cent in certain non-core sectors and bring its stake down to 51 per cent in some key sectors, while keeping strategic areas like atomic power and defence totally under state control.

Industrial Credit & Investment Corporation of India chairman N Vaghul, one of the speakers on the first day of the conference yesterday, said the government should withdraw from the financial institutions lock, stock and barrel.

The reforms in the financial markets in the past have been breathtaking, and the sector is set for a major explosion in the next two years. But the financial institutional framework needs to change. Unfortunately, the government continues to dominate 90 per cent of the financial system, said Vaghul, adding that the growth of the financial sector would not keep pace with the potential real economic growth.

The ICICI chairman said the projection of the rate of economic growth at 7-8 per cent, although it was good, did not reflect the full potential of the countrys economy, which, according to him, could easily attain a growth rate of 10 per cent. However, Vaghul said, obstacles like cutting down on basic and essential costs, inadequate spending on social sectors, would slow the pace of reforms.