Economy To Turn Around From Sept: Sinha

Finance minister Yashwant Sinha yesterday said industrial slowdown was approaching its end and the economy would start picking up from mid-September as the government starts implementing its policies.

Starting September 15, the government intends to go ahead with the intended disinvestment in public sector undertakings without waiting for the capital markets to revive. It will also increase expenditure to improve infrastructure without piercing the sustainable level of fiscal deficit.

The government has also prepared a plan to set up a series of mega-power plants with capacities over 1,000 mw. The plan is being forwarded to the cabinet and the group of ministers for approval.

 

The government is also taking sector-specific measures. Certain sectors like steel, paper, capital goods and commercial vehicles are seen to be in particularly bad shape.

The finance minister revealed that direct and indirect tax collections in July had gone up, a sure sign that the slow-down was tapering off. He said he would reveal figures at an appropriate time.

Sinha expressed confidence that corporate results for the second quarter of the current financial year (July-September) would be better than the first quarter.

"I find it difficult to buy the theory that the recession in deepening. I am waiting for September. By then the economy will start looking up," he said while addressing bank and financial institution heads and industry captains at the Federation of Indian Chambers of Commerce & Industry in New Delhi.

"Without piercing the sustainable level of fiscal deficit, we should go ahead and spend. We will start incurring all expenditure projected in the budget after September 15, when the real working year starts. Implementation of all public sector projects will begin in mid-September," he said.

This would revive demand in the key sectors like steel and cement, he said.

Bi-monthly targets will be set for infrastructure-related ministries for implementation of various projects. Sinha intends to sit with fellow ministers to review schemes. All projects pending from the previous years are being reviewed.

PSU disinvestment, through which the government aims to raise Rs 5,000 crore in the current financial year, will start with four companies, IOC, GAIL, Concor and VSNL.

The government is working on steps to solve the problems dogging non-bank finance companies (NBFCs). "When some NBFCs failed, we started throwing the baby out with the bathwater. We have set up a task force to ensure that they function in a healthy manner," he said.

About the capital markets, Sinha said, "I do worry about the capital markets. I am very much concerned when they fall freely." However, the current depression in India's capital markets was a result of the Southeast Asian economic meltdown and the global recession, he added. "We have a difficult external situation. If we globalise, we have to take the unfavourable with the favourable. We should have the courage to weather the storm," he said. The finance minister called upon industrialists to help dispel gloom over the state of the economy. He pointed out that a growth rate of 5-5.5 per cent would be quite splendid against the backdrop of the Asian crisis.

The finance minister pointed out his government had not taken any decision to overturn a single policy of any of the previous "reform-oriented" governments.

"Reforms have been going on since 1991. By 1998, what remains is the difficult and hard parts. It is that core that has to be tackled by us. Didn't we take the courage to say that we will close down PSUs that cannot be revived? Didn't we have the courage to announce that we will bring down government holding to 26 per cent in PSUs in non-strategic areas, handing over the management to private parties?" he said.

The finance minister pointed out that reform Bills like the Foreign Exchange Management Bill, Anti-Money Laundering Bill and the repeal of the Urban Land Ceiling (Regulation) Act had already been moved in Parliament. "The whole focus of the debate on insurance has changed. Earlier, it used to be whether insurance should be privatised. Now it is whether a certain level of foreign equity should be allowed in the sector," Sinha said.