Govt Borrowing Limit Must Be Tied To Gdp'

The total interest payment by the government is 46 per cent of revenue receipts. Its reliance on borrowings needs to be brought down drastically.

A limit for government borrowings has to be fixed in relation to the gross domestic product and the annual revenue, Madhu Dandavate, deputy chairman of the Planning Commission, told Business Standard.

The commission will submit the approach paper at the meeting of the National Development Council in December.

The paper will set out the federal nature of the ninth plan and suggest measures to evolve a system of participatory planning involving panchayats, state governments, the Centre and the Commission.

 

Even the Reserve Bank governor has sought a legislative ceiling on government borrowings. The disinvestment commission will go into the form and content of disinvestment. We will not spell out the amount of borrowings or disinvestment in exact terms. But we want to set out the broad parameters, he said.

He said Parliament should exercise restraint on the government over the issue of government borrowings under Article 292 of the Constitution.

The article enables Parliament to fix limits to borrowings upon the security of the consolidated fund of India.

Despite an apparently satisfactory rate of growth, the rate of agricultural growth has declined, fiscal imbalances have grown and the problem of unemployment remains to be tackled seriously, Dandavate said.

He felt the process of economic reforms has not addressed these issues with the seriousness they deserve.

We have to be extremely selective about allowing foreign investments. We should reject foreign investment in consumer goods manufacturing sector because it will make the small scale industry sector unviable.

Foreign investments should be encouraged in infrastructure and in areas where there is a need to meet the technological gap, Dandavate said.

Even Manmohan Singh, the celebrated advocate of liberalisation had said that the small scale industry sector provides 40 million jobs, accounts for 40 per cent of industrial output and 35 per cent of exports.

Barring a few exception, China has not permitted foreign investments in consumer goods manufacturing,Dandavate stated.

The commission's deputy chairman said that agriculture and rural development will constitute the main thrust areas of the ninth plan.

More than increasing the quantum of investments in agriculture, it is necessary to make optimal use of it. We need to infuse the necessary technologies like sprinkler and drip irrigation in the farm sector, he said.