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PM underscores fiscal discipline, consensus on subsidies

In the meeting with his Economic Advisory Council in New Delhi on Friday, Prime Minister Atal Bihari Vajpayee said there was need to evolve a mechanism for imposing greater discipline on the use of resources both by the Centre and the states and to prevent diversion of funds to optimise returns on investments.

''I cannot hide my concern on the state of finances of the Union and states as well. Fiscal discipline is at the centre of any strategy for maintaining macro-economic stability,'' he said.

Vajpayee said while containing expenditure on subsidies is crucial for sound fiscal management, there is a need to ensure that the poorer segments of society are not adversely affected and, while working out transnational arrangements, suitable social safety nets must be put in place.

''We need to achieve a broader national consensus on our approach to subsidies, both implicit and explicit, and I solicit your views on how we should deal with this issue,'' Vajpayee said.

Vajpayee asked the economists to consider steps that are necessary to ensure that the external side of economy remains healthy. ''Exports, even while becoming positive in the last two months, continue to be sluggish and the trade gap as well as current account deficit for the fiscal year need to be kept under constant review,'' he said.

The issue of global financial architecture will figure prominently at the forthcoming meeting of the G-15 in the West Indies. It is also connected with the ongoing debate in the World Trade Organisation for the next round of negotiations.

The prime minister sought the views of the economists on the key elements for the reform of the global financial system and the contribution that India should make in fostering wide ranging consensus-building process.

The meeting had an in-depth discussion on improving the finances of the Centre and the states and the imperative of improving the telecommunications system.

The meeting also took up the question of the ongoing Budget exercise. It was decided that the inputs provided by economists would be used as inputs in formulating budgetary thinking.

Other issues that were taken up included divestment expenditure and the evolution of policies on subjects like demography, fiscal consolidation and the question of finances of the Centre and the states.

Suggestions were made that the prime minister could use the inputs provided at the coming G-15 meeting to help evolve a common approach among developing countries at the ministerial meeting of the World Trade Organisation, scheduled to be held at the end of the year.

It was decided to hold the next meeting of the council sometime in March, after the presentation of the Budget.

The other suggestions that were made will be examined further and suitable plans for their implementation will be formulated.

The participants included Dr Amresh Bagchi, Dr I G Patel, Dr Kirith Parikh and Dr Montek Singh Ahluwalia.

Finance Minister Yashwant Sinha and Planning Commission Deputy Chairman K C Pant also attended the meeting. Secretary to prime minister N K Singh, Finance Secretary Vijay Kelkar and other officials of the Prime Minister's Office were present.

Earlier, Vajpayee indicated that there would be a hike in social sector development. He said there had been underinvestment in this area.

UNI

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