Congress reiterates its reforms credentials

MANDATE 2004

The Congress today assured that economic reforms would not be jettisoned once it formed the government at the Centre.

With the party set to come to power with the support of the Left Front, there were apprehensions in industry circles that the opening up of the economy would be slowed down.

The Congress' economic agenda differs in several respects from the National Democratic Alliance's (NDA) plan. The Congress, however, is trying to change it by working out a common minimum programme with its allies.

The party's election manifesto, called "Economic Growth""The Congress Agenda," says it will encourage foreign direct investment, which it claims is a safer method of receiving foreign funds than portfolio investment.

Simultaneously, it says there will be a well designed regulatory mechanism to check monopoly through mergers and acquisitions.

The agenda says this caution will apply specifically to the banking, insurance and telecommunication sectors.

This means the new government will have to decide if it will continue with the softer role envisaged for the Competition Commission instead of Monopolies and Restrictive Trade Policies Commission (MRTPC), which had a specific mandate to check monopoly.

The Vajpayee government had marked the switchover to Competition Commission as one of its major reforms initiatives for the corporate sector.

However, the party programme makes up for it by saying it supports the elimination of all bureaucratic and administrative hurdles to investment.

It proposes to do this by removing the requirements for any investor to seek any form of permission for making any investment. The import of technology, for instance, will not need any special permission from the government.

The programme has also proposed a development rebate in corporate taxes, to harness public-private partnership.

It says this will lead to rapid improvement in efficiency and productivity. In a controversial clause, the agenda has recommended a reservation policy in employment for the private sector.

Despite its objection to the targets of fiscal and revenue deficit reduction, which had to be scrapped from the Fiscal Responsibility and Budget Management Act, the Congress programme says it is committed to restoring fiscal discipline mainly by minimising the revenue deficit and strictly regulating non-capital expenditure.

The Congress' agenda notes that for raising the rate of growth to 10 per cent annually, the rate of investment has to be hiked to about 35 per cent, a figure similar to that of China and "not at all improbable in India, with rejuvenation in the capital markets".

The agenda says while investment has to be raised to about 35 per cent of the GDP from the current 25 per cent, the financial sector, consisting of banking, insurance, debt and equity markets "need to be greatly strengthened to create an environment conducive to the growth of savings in the form of financial assets".

The party has however made it clear that it differs from the disinvestment programme of the National Democratic Alliance (NDA) government.

It has also opposed equating of disinvestments with strategic sales. The agenda claims that no attempts have been made to restructure public sector undertakings to fetch a better value for them.

The Congress programme says it believes that the economy is at a stage when the country can grow at a high rate, culminating at an annual growth rate of 10 per cent of the GDP.

This, it says, will abolish unemployment, poverty, hunger and illiteracy and ensure universal coverage of primary health care.

Besides, the document says the party will encourage investors, especially the new and small entrepreneurs, the self-employed and the educated youth. It will promote rural industry, housing and slum clearance with appropriate credit and capital subsidies.

The strategy

• Encourage foreign direct investment, which it claims is a safer method of receiving foreign funds than portfolio investment.
• Well designed regulatory mechanism to check monopoly through mergers and acquisitions.
• Development rebate in corporate taxes, to harness public-private partnership.
• Restoring fiscal discipline by minimising the revenue deficit and strictly regulating non-capital expenditure.