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Learn from Asian experience, says Chidambaram

"In the next 1,000 days, which will see India marching into the 21^st century, nothing can hold us back except the inability to recognise our true potentials,'' Chidambaram said, while addressing a plenary session at the 1997 India Economic Summit, jointly organised by the Confederation of Indian Industry and the World Economic Forum.

For years, he said, India has trod on the inefficient path of foreign exchange controls. ''The challenge before us now is to take the efficient path to achieve the goals,'' he said. "The country has now to fashion its policies to push ahead reforms.

''Our government bowed out of office after 500 greatly satisfying days and we do not need two governments in the next 1,000 days to take us ahead. Whichever government comes to power will push reforms ahead, which has now been understood to be irreversible,'' the finance minister said, adding that if all the policies are in place, nothing could hold back India from surging ahead.

He pointed out that individual states have set their own targets and even moved ahead to achieve them. "Kerala has achieved 100 per cent literacy rate and brought down population growth rate to a mere 1.4 per cent. Punjab and Haryana have supported agriculture while West Bengal chose to decentralise government by empowering the panchayats (village councils) and local bodies.

"Gujarat, despite a succession of governments, has embraced economic pragmatism as an ideology. Every government in the state swears by principles. If every state can individually choose efficient paths, India as a whole too can move ahead in that direction,'' he declared.

He admitted that the country was faced with certain problems in capital markets and infrastructure. However, he stated that these problems were ''surmountable.''

Terming himself as a person who would plead for greater liberalisation while learning from the Asian experiences, Chidambaram stated India's future was secure with greater cooperation of government with the industry, farmers and the service sector. ''This will go a long way in making India a vibrant, open and growing economy.''

He termed the Asian crisis as ''exaggerated'' and said that the countries did make some mistakes during their period of growth. Pointing out their mistakes, the finance minister said they allowed the proportion of short-term debts to rise and also allowed unrestricted inflow of capital. ''These inflows which were far above their capacity to absorb and give adequate returns. As a result it flowed into real estate. These mistakes coupled with current account convertibility led to the debacle,'' he stated.

However, according to Chidambaram, turning back and looking inwards was not the solution. ''What we need today is more regulatory authorities and reforms while guarding against the mistakes committed by the other Asian nations," he said emphatically.

Regarding the investment target of Rs 3.45 billion set for infrastructure development, he said India has the capability to absorb Rs 10 billion dollars of foreign equity every year. ''So there would be no problems in raising funds for the developing infrastructure. Moreover, we envisage a bulk of the amount to come from domestic investors.''

He also pushed for opening up the pension and insurance sector for attracting funds to be used for infrastructure development.

The finance minister admitted that the Foreign Investment Promotion Council had ''failed to take off'' but assured the foreign investors that the government would try to revive the FIPC or create similar advisory councils.

Besides, he supported Industry Minister Murasoli Maran's statement yesterday that the Foreign Investment Promotion Board should be scrapped.

Reacting to a suggestion made by Swedish firm Investor AB Chairman Percy Barnevik that India needs to set up advisory councils for moving ahead, the finance minister said the country had set up an advisory council in the form of FIPC ''but unfortunately it failed to take off. I suppose it can now be revived or new ones set up.''

on abolishing the FIPB, he said it was an interesting idea and can be looked into, ''It is not supposed to be a hindrance to foreign capital inflow. If the need comes, we will even abolish the FIPB and delegate powers to the states,'' Chidambaram declared, adding, "If required, FIPB's regulations can also be looked into. We can make it a broad policy-maker.''

Earlier, Percy Barnevik said in spite of its strong economic fundamentals, India has been running behind the other fast moving and emerging markets, including China.

"If India thinks it is fast, others are faster," he asserted. "When India brought down tariffs to 30 per cent, China slashed it to 10 per cent. When India's foreign direct investment inflows stood at Rs 2.5 billion dollars, China attracted 42 billion dollars.'' He attributed this to the poor investment climate in the country and the fact that reforms were ''not deep enough.''

He called for speeding up the execution of reforms with benchmarks of successful countries and setting up investor advisory councils. ''These are the bare necessities for India to move ahead.''

Barnevik had said India needs to speed up execution of reforms with benchmarks from success stories in other Asian nations and investor advisory councils for the entire country as well as for individual states.

EARLIER REPORTS:
Gujral confident about India
WEF executive pessimistic about India