Red tape to blame for fiscal malaise: Jaswant

As the Opposition on Monday painted a gloomy scenario of the economy amid mounting fiscal and revenue deficit and decreasing rates of savings and investment, the Government sought to deflect the attack by criticising the bureaucracy for not keeping pace with policy changes.

Three former finance policy makers of India -- Dr Manmohan Singh, Pranab Mukherjee and former RBI Governor Bimal Jalan -- spoke during the debate.

"To achieve a zero fiscal and revenue deficit target, India needs a law, which stipulates that borrowings shall only be for capital expenditure and not for meeting revenue deficit," Finance Minister Jaswant Singh told the Rajya Sabha, while replying to discussions on second batch of Supplementary Demands for Grants for 2003-04.

Singh said "the bureaucracy has not kept pace with policy changes" and expressed concern at the slow inflow of Foreign Direct Investment (FDI). Bureaucratic hurdles were delaying the process, he said.

India had sought large investments in power generation and other infrastructural sectors but few had actually come on ground, he said.

The Rajya Sabha later approved the Rs 7,660.21 crore extra spending by government in the current fiscal, including Rs 2,300 crore towards compensation to state-run Bharat Sanchar Nigam Ltd (BSNL) for meeting rural telephony obligations.

The Bill was passed by Lok Sabha last week. Speaking in the debate, Manmohan Singh said savings in the public sector had shown a sharp decline, from 2 per cent of the GDP in 1995-96 to minus 2.5 per cent of the GDP now.

He said the government needed to analyse this disturbing trend. Rates of investments were also substantially lower -- both for the public and private sectors -- from the 1995-96 levels. While there was a certainty that agriculture was going to do better, that was an act of God, he said.

Singh said he feared India had graduated to being a services economy prematurely. He said in China, the weight of manufacturing in the GDP was a high 35-40 per cent.

In India it is just 17 per cent. BJP leader Balbir Punj lauded the government's economic management, but pointed out that Labour Law reform was still pending. He cited lack of political consensus as the reason for political hurdles in the way of reforms.

However, nominated member Bimal Jalan disagreed. He said the criticism of the government by the Opposition on issues like infrastructure and power was bipartisan.

Jalan said what held up growth was procedural and legal complexity. He said India was no longer lurching from crisis to crisis "" as it did, from Gulf War I to an oil crisis and then to drought -- leading to a 1991-like situation.

Last year too had seen an oil crisis, a drought and a war in the Gulf. But India had stood firm, indicating economic resilience. What was needed, however, was to move beyond: removing legal hurdles and simplifying tax laws by authorising CBDT and CBEC to simplify laws; and to remodel and restructure old institutions instead of creating new ones.

He cited the example of the telecom sector that had a Telecom Commission, Trai, TDSAT, a Group of Ministers and a huge legal infrastructure.

Jalan also said much more attention needed to be paid to agriculture: rural roads and working tubewells (only 30 per cent currently).

Pranab Mukherjee (Congress) said the Centre's share of revenue realisation was down. In order to achieve an 8 per cent growth, state planning had to be more realistic.