PM unveils
package to boost economy
Tribune
News Service
NEW DELHI, Oct 24 —
The Prime Minister, Mr Atal Behari Vajpayee, unveiled a
morale-boosting economic package today expected to buoy
the capital market, generate employment and put the
derailed telecom and insurance sectors back on the path
of reforms.
Pointing out that the
Indian economy was in urgent need of deeper, broader, and
faster reforms, the Prime Minister told the 71st annual
meeting of the Federation of Indian Chambers of Commerce
and Industry here that his government was fully committed
to this objective and "the commitment was not in
words, but action".
The immediate action plan
begins with an eight-point strategy to restore vibrancy
in the capital markets, including meeting the
long-standing demand of industry to allow companies to
buy back shares.
On the infrastructure
side, the government would start, within this year and
from 20 different places across the country, work on a
7,000-km road project, which has a potential to create as
many as three crore man-years of employment.
A new telecom policy is to
be formulated within the next three months to provide a
state-of-the-art nationwide telecommunication network,
speed up rural telephone services and to meet the new
challenges of the convergence of telecom, information
technology and consumer electronics.
"We propose to permit
companies to buy back shares within the prudential
guidelines set by the SEBI in order to enhance the value
to investors", Mr Vajpayee said amid applause by
captains of industry and other representatives at the
Vigyan Bhavan hall. Having got the proposal cleared by
the group of ministers, the proposal is expected to get
the Union Cabinet’s nod next week, industry sources
said.
The other measures
proposed for rejuvenating the capital markets include:
— Abolition of the
existing provision requiring government’s prior
approval for inter-corporate investments by one Indian
company in another Indian company.
— Companies will be
permitted to enhance acquisition limits in accordance
with the recommendations of the Justice Bhagwati
committee on take-over regulations.
— Structural
improvements will be undertaken for accelerating demat
trading and settlements. This would bring about greater
efficiency and transparency at a lower cost and thus
serve the interest of small investors.
— Restructuring of
PSUs and a credible disinvestment programme for improving
the productivity of economy. Keeping with the
unsuccessful results of the past in the disinvestment
process, it is now proposed to revise the process and set
up a more transparent mechanism so that the pace of
restructuring and disinvestment is commensurate with the
urgency of the problem. The action to achieve these
objectives will be in place within 30 days.
— The government has
initiated measures to open the insurance business to the
Indian private sector, which is a major step in
mobilising long-term resources for funding long-gestation
infrastructure projects. The government is at present
examining a proposal to permit an appropriate level of
minority foreign equity in the insurance sector.
— Steps will be taken
to speed up the passage of a new Companies Act and
Foreign Exchange Management Act. Views of trade and
industry will be invited before finalising the Money
Laundering Act.
— The government will
support the Unit Trust of India fully in honouring its
obligations, especially under the US-64 scheme.
Mr Vajpayee said the
government realised the need to further strengthen the
financial sector with a view to making it more resilient.
Steps to improve the portfolio of financial institutions,
to deal with the problem of non-performing assets, and
improve the efficiency of FIs for making finance
available at affordable costs was a high priority for the
government, the Prime Minister said.
The Prime Minister pointed
out that government spending in infrastructure sectors
had come down significantly after the start of the
economic reforms and he would remove this damaging
imbalance.
He said recognising the
importance of infrastructure in the development process,
the allocation of such projects had been substantially
augmented by over 35 per cent— from Rs 45,252 crore
to Rs 61,146 crore. In the project sanctions of the
All-India FIs, the share of infrastructure projects had
gone up by 217 per cent in the current year and
infrastructure projects accounted for one-third of the
sanctions of Rs 75,000 crore.
Infrastructure development
would get a further boost with the government’s plan
to start work on a 7000-km road project criss-crossing
the country. It envisages a six-lane North-South corridor
connecting Kashmir to Kanyakumari and a similar East-West
corridor connecting Silchar to Saurashtra.
The project, which is
expected to cost Rs 28,000 crore, would have the scope
for maximum private sector and foreign participation. The
project also has the potential to create three crore
man-years of employment, which would be a major
contribution to the realisation of the national goal of
"berozgari hatao".
Mr Vajpayee said cement
concrete pavement would be the preferred technology in
the project as well as other ongoing projects for
four-laning of national highways. He said the move would
give a big boost to the cement and construction
industries.
Referring to the
telecommunication sector, Mr Vajpayee acknowledged that
there were a number of knotty problems – a difficult
legacy inherited by the government. To untie the knots,
the Prime Minister said a new Telecom policy would be
formulated within the next three months.
In addition, within the
next 15 days, the following measures would be taken:
— All outstanding
issues between the Department of Telecommunications and
the Telecom Regulatory Authority of India (TRAI) would be
resolved to strengthen the latter’s role. A suitable
out-of-court settlement would be found for pending legal
dispute. Hereafter, the government would ensure that two
wings of the executive did not go to court, for this
amounted to abdication of political responsibility.
— The new internet
policy would be announced and the licences issued to
private Internet Service Providers.
— The Irridium
project for global satellite telephone service would be
launched, as scheduled, on November 1. The necessary
approval for grant of license for this project was given
by the DoT yesterday.
— The Prime Minister
has mandated the National Task Force on Information
Technology under the chairmanship of Mr Jaswant Singh to
prepare a report suggesting a resolution of the
outstanding issues in the telecommunications sector,
including the licence fee structure for basic and
cellular telephone operators. The Task Force will submit
its recommendations before November 30 and the government
will take appropriate action before the end of the year.
The other initiatives
spelt out by the Prime Minister to give a boost to the
economy includes the oil exploration sector, where the
government will offer deep acreages with high potential
for bidding. Bids would be invited within the next two
months.
The government will
identify five cities for the construction of world-class
international airports with a maximum of 100 per cent
foreign equity investment.
Housing was another sector
on which the government would focus. The National Agenda
for Governance has set the ambitious target of
constructing of 20 lakh additional housing units each
year. Besides giving a fillip to many industries, this
would also generate large-scale employment.
Mr Vajpayee said the
Environment Ministry would prepare a list of all
industrial and developmental projects above Rs 25 crore,
in which environmental clearance was pending for over six
months. Consistent with the government’s commitment
to harmony between development and environmental
protection, these would be duly examined and all
deserving projects would be cleared by the Ministry
within the next three to six months.
The Prime Minister while
resolving to put the Indian economy onto a higher growth
path also asked industrialists and businessmen to look
within and introspect to realise whether they had lived
up to the expectations of the people and the government.
The present downtrend in
the global economy was only a part of the reason for the
difficulties faced by Indian business and industry. An
equally crucial reason had arisen from internal factors
— and these were not confined merely to the policies
and performance of successive governments, the Prime
Minister said.
"What is the main
cause of the depressed state of the stock market? Is it
not, at least partially, created by a large number of
public offerings by unscrupulous promoters who exploited
the market in its boom phase and later betrayed their
commitment to the investors, mostly small
investors?"
Mr Vajpayee said he had
instructed the agencies concerned in the Finance Ministry
to punish such predatory promoters. Suitable punitive
action would be taken within the next three months, he
said.
The Prime Minister also
pulled up Indian companies for failing to incorporate
good corporate governance. He said the time had come when
this matter could not be left to the promoters alone. The
government would like the financial institutions, on the
strength of the significant stakes they hold in the
companies, to demand better performance and adherence to
sound corporate practices, he said.
He was critical about some
companies basing their investment decisions on short-term
sentiments and not on the long-term opportunity offered
by the country.
In this regard he cited
the example of the foreign direct investment proposals
approved by the successive governments since 1991. The
approvals amounted to 52.67 billion dollars. As against
this, the total FDI inflow had been only 13.41 billion
dollars, which was only 25 per cent of the approvals.
"The big Indian
opportunity can be realised only if business, industry,
and the government work with one mind and for one
purpose—strengthen the economy at the
earliest", Mr Vajpayee said.
On the global front, the
Prime Minister said a massive churning process was taking
place in the world economy and the name of this
"samudra manthan" in the modern era was
globalisation.
Mr Vajpayee said
globalisation was a historical reality and forging
mutually beneficial and cooperative relations was
necessary for growth and prosperity.
The Prime Minister,
however, said there could be no single model or solution
to the problems of economic development and each nation
had to pave its own path, based on its own concrete
national realities and priorities. "This is what
Swadesh means", he said adding globalisation and
"Swadeshi" were complementary and not
contradictory to each other.
Saying that the World Bank
and the International Monetary Fund were set up in the
pre-globalisation era and at a time when most countries
in the world were either not free or had just won their
independence, Mr Vajpayee advocated an innovative
restructuring of the Bretton Woods twins, to reflect the
need of today’s interdependent world.
India also wanted a
radical change in the approach and functioning of other
institutions such as rating agencies and global
commercial banks he said.
Referring to the United
Nation’s proposed international conference two years
from now to suggest a new policy framework for the global
financial system, Mr Vajpayee said the government was
formulating a six-point conceptual framework for the
innovative design of a new global financial architecture.
The six pillars of the new
architecture would reflect the need for:
— Managing large
capital flows without excessive volatility.
— Speedy
decision-making and timely corrective action in the face
of instantaneous electronic fund transfers across the
globe.
— Transparency among
all players – public and private, government and
quasi-government, in developed and developing countries.
— Achievement of
equity in an inherently unequal world economic order.
— Timely preventive
steps against the "contagion effect".
— An ability to
introduce adaptation and innovation in a fast-changing
financial system.
Mr Vajpayee said the
proposed points would be presented for a national debate
in which the views of Opposition parties and all sections
of business, industry and labour would be invited.
India would engage
constructively with other countries in an effort to
promote an international consensus for restructuring of
the financial system, he added.
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