Finance minister Yashwant Sinha yesterday warned that the existing level of fiscal profligacy was not sustainable but said the economy was recovering and the current financial year would end with an average growth rate of 6.5 to 7 per cent of the gross domestic product.
Addressing the Economic Editors' Conference here, he said the government would very soon move a Bill to regulate non-bank financial companies, press for passage of the Bill on a new revenue-sharing arrangement between the Centre and the states and take a decision on the corpus of the proposed Fiscal Facility Fund.
Sinha defended the government's decision to divest in Gas Authority of India Ltd. He said there was no question of either British Gas or Enron being given seats on the GAIL board.
Sinha flayed former finance minister P Chidambaram for claiming that the government had engaged in a distress sale of the public sector company's equity and that it reeked of a scandal.
"If the government had called off the deal, it would have sent a very wrong signal to the world and jeopardised the entire divestment policy," Sinha said, dismissing Chidambaram's claims.
He said the government was prepared to face any political challenge that the Opposition might pose in Parliament over divestment.
On the proposed move to sell National Hydroelectric Power Corporation to National Thermal Power Corporation, Sinha indicated that the government was considering several innovative options to raise resources. "The power minister and I had discussed something like this. I will have to wait for the proposal," he said.
The minister said the present fiscal crisis was not a creation of yesterday. "It is not a problem of yesterday or today. It is two decades old. The trend is worrying, but there is nothing particular in this year. My idea of focusing on this was not to create panic," he said.
Sinha emphasised that fiscal reforms were here to stay and added that bailout funds to states would be withdrawn if they failed to adhere to the terms of the memorandum of understanding with the centre.
"The memorandum of understanding is time-bound. It will be our joint responsibility to see that this deadline is met. We will continue to persuade the states to adhere to it by undertaking a mid-term fiscal correction," Sinha said.
