Fm Cautions Industry Against Anti-Reform Forces

Union finance minister Palaniappan Chidambaram has voiced concern over a section of Indian industry falling prey to forces trying to derail reforms.

These forces have now gained space, which they did not have 12 months ago, in the name of protectionism, self-sufficiency and a distorted interpretation of swadeshi, Chidambaram said at a meeting during his one-day whistle-stop tour of the city on Saturday.

Urging captains of industry to rise above protectionist temptations, the minister said, This attempt to roll back reforms will not help India. The country cannot succeed by undoing reforms, but by accelerating the pace.

He asserted that the global community, save North Korea and Cuba, had accepted the principles of open economy, free flow of technology and capital and reward for entrepreneurship and efficiency as the path to progress.

 

The two countries which have not accepted this principle are facing the grim spectre of starvation, Chidambaram said, observing that thousands have perhaps died of hunger in North Korea.

After six years of reforms, the country cannot afford to go back and industry must foil the bid by anti-reform forces, he added.

The last fiscal year, which witnessed a change of government and the phenomenon of a short-lived government followed by a tentative coalition, was a daunting year for the economy, Chidambaram said.

However, the finance minister maintained that all the difficulties faced in the previous year are behind us and we can look forward to 1997-98 with confidence and hope. I am sure the industry, and the economy, will do much better during this year.

In 1996-97, even as the political class was trying to find its feet, consumer demand was sluggish due to decline in agricultural production in the previous year.

The pursuit of a single point programme of containing inflation by the government of the day in 1995-96 had resulted in high interest rates and tight liquidity position in the following year.Chidambaram said there was also a sense of fear and suspicion among the people on the prospects of economic growth, while there was the usual quota of scams and scandals too.

Banks were not willing to lend, bureaucracy was weary of decisions and the political situation was uncertain which made things miserable for the economy, he said. Saying his current mission was to `spread the message of hope and confidence,' Chidambaram said the year in progress would witness rise in consumer demand. in four to six months from now.

Experience had shown that final demand would rise in the year following good agricultural output, the minister observed, pointing out that the production last year was a record 192 million tonnes.

With rise in output, money will reach people's hands boosting demand for goods, he added.

The finance minister maintained that the fundamentals of the economy continued to be strong with interest rates falling and liquidity position easing considerably.

Chidambaram disclosed that in the first 53 days of the current fiscal, bank deposits had gone up by Rs 10,080 crore, while bank credit went up by Rs 4,000 crore, the latter against a negative growth of Rs 3,000 crore during the comparable period in the previous year.

Inflation had come down to 5.93 per cent and foreign exchange reserves stood at a record $24.7 billion.

Further, foreign investors were `voting with both hands,' and foreign direct investment (FDI) was flowing in at the rate of $300 million a week.

The rupee was `unusually strong', and in fact, would have strengthened but for market intervention by the Reserve Bank of India (RBI), Chidambaram said. This is the time to import capital and technology.

On the domestic front, income tax rate had been brought down to such an extent so that no scope had been left for any reduction in the tax rates, Chidambaram said.

Addressing a function organised by the income tax department, the minister asserted the current rates were the `resting point' of India's tax rates, and any relaxation could henceforth be only in the slabs.

He called upon industry and individuals to pay up their tax liabilities and remove the country's image as a `nation of tax-evaders,' as there was no justification for tax evasion any more.

The government had embarked on a strategy to levy lower taxes and encourage compliance, Chidambaram said, cautioning that it may be forced to revert to the high tax regime if evasion continued.

I have done everything I could. Now, it's up to the tax-payers to co-operate with the government. At the same time, the income tax department must work towards removing its bad name as an agency of harassment, Chidambaram said.

He disclosed that a survey by ten independent agencies across the country had revealed that the income tax department was held to be synonymous with `harassment' in the eyes of the tax-payers.