Govt should aim to curb expenditure

Govt should aim to curb expenditure
PRESS TRUST OF INDIA

KOLLAM, DECEMBER 12: The corner-stone of the new economic policy paradigm was to work towards making the Indian economy more efficient, productive and competitive, noted economist and former RBI governor M Narasimham said here.

Delivering the key-note address at a national management convention organised by the Quilon Management Association yesterday, he said the liberalisation process would throw up many challenges to the management profession but, as often happens, these challenges could be turned into opportunities.

The structural reforms were initiated in 1991 against the backdrop of a serious economic and financial crisis faced by the country with the inflation at an unsustainably high level and the fiscal deficit high and rising. Priority was appropriately given to curtailing the fiscal deficit and the other major aspects of reforms pertained to liberalisation of industrial policy, he said.

He said the continuing fiscal deficit, especially on revenue account, had meant large borrowingrequirements, which, in turn, had crowned out private investment activity and driven real interest rates up in the economy with obvious adverse effects on investment and production. The reforms, initiated during the Congress rule, had found acceptance in the common minimum programme of the United Front and was now being carried on by the BJP-led government, Narasimham said.

`The concept of reforms with a human face' had understandably a strong political appeal, he said. Subsidies had grown sharply and in a haphazard manner to a level where both implicit and explicit subsidies were almost equal to or perhaps exceeded the tax income ratio causing serious distortions in investment and production, and encouraging waste and inefficiency without adequately meeting the objective of protecting the weak and underprivileged, he said. There was a need to contain these expenditures and limit subsidies to clearly targeted groups such as low-income households, he said.

A programme of debt consolidation as a precursorto containing the growth of debt was clearly needed and it was heartening to see that consideration was being given to enacting legislation in the form of a fiscal responsibility act, he noted. The state should withdraw from areas where it has no business and use the resources thus saved to concentrate on areas where it has primary responsibility, such as health, education, population control and other aspects of social and physical infrastructure and Kerala has set a worth example in this regard, Narasiham said.