BUDGET 1999-2000
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Fin Sec swears by govt downsizing, moots VRS for profit-making PSUs

Finance Secretary Vijay Kelkar today said the government was committed to downsizing itself and was in the process of defining functions and parameters of the areas where it should be and from which it should move out.

Addressing the second Budget conference on Strategic Challenges of Union Budget-1999, Kelkar said the Madhya Pradesh government had successfully downsized itself.

There were several areas where the government had no business to be. He cited the example of computer maintenance in this connection.

The one-day conference has been organised by the Standing Conference of Public Enterprises.

Kelkar said the proposed Expenditure Commission would give details of activities where the government should operate. Reducing the size of the government was absolutely crucial for fiscal correction.

Kelkar said days of cheap money for the public sector are over. Performance criteria of the PSUs will be looked into while providing funds.

Kelkar said the voluntary retirement scheme should not be restricted only to sick PSUs but must also encompass profit-making public sector companies.

Kelkar said the 1999-2000 Budget was Yashwant Sinha's Budget and it is his ideas that had prevailed. In many cases, some senior officials were apprehensive of certain steps, such as rationalisation of the excise duty structure to the extent it has been done. Kelkar was commenting on a remark by the organisers who described him as the chief architect of the Budget.

Kelkar denied knowledge of the reported resignation of one of the members of the Disinvestment Commission. The resignation was attributed to alleged appointement of foreign consultants to look into the recommendations of the commission. He also said nothing on whether the government was reviewing such a procedure.

Kelkar said the most important aspect of the Budget is that it can work in a coherent manner. Things started moving from the first day itself, he said, when certain duty structures came into force.

There is a great deal of caution in the Budget. The international situation is very difficult. Lessons have been taken from cases like Brazil which had $ 10 billion foreign exchange reserves and a large industrial base. Suddenly the Brazilian economy was in trouble, he pointed out.

While attempting to kick-start the economy, the Budget did not go in for reckless adventurism. It had contended with the fact that the fiscal deficit was 6.5 per cent of GDP, Kelkar observed.

Kelkar said government borrowings had been large and there was risk of inflation raring its head. ''It is a cautious Budget,'' he said.

The Budget had a six-point strategy and had set in motion the process of medium-term fiscal correction.

The Budget is a pointer that the Indian economy is mature and marked by rule-based reforms.

There is much greater reliance in the Budget on creation of private demand and investment. The village sector is to be the prominent engine of growth. All this implies that there is low import content which means a much higher domestic multiplier. It is driven by individual consumer demand, he said.

Kelkar added that growth possibilities are widespread, such as those emanating from housing activity. Housing is to be a major source of demand as also the agricultural sector which is expected to register a 5.3 per cent growth rate.

Kelkar said private investment is to trigger off dynamics of the economy and the first condition for this is the revival of the capital markets. There is also a rise in public investment, for example in the case of railways.

Kelkar said stock options have been provided in the Budget. He said he was convinced of the greater role of workers in ownership. There is also a provision for much larger funds for venture capital.

Kelkar said the Budget recognises technical linkages between industry and universities. Large resources can be mobilised from the private sector for the universities for R&D programmes.

He said PSUs have been at a disadvantage because of zero import duty on capital goods. The government has done away with this provision and lowered the effective rates of tariff protection.

The government has set a very ambitious target for disinvestment or privatisation. It intends to garner Rs 100 billion from PSU disinvestment.

The finance secretary said the Budget provides much greater scope for internal restructuring, besides incentives for mergers, demergers and spin-offs.

Kelkar was asked whether the government was for completely scrapping of the Industrial Development and Regulation Act or wanted modifications. He said this was an issue being looked into by the industry ministry.

Budget 1999-2000

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