| Yashwant Sinha: Good work has been undone |
| Yashwant Sinha / New Delhi February 29, 2008 |
| It is always difficult to answer a question like what I would have done today if I were Finance Minister. It is like asking a doctor to treat a patient after other doctors have failed and the condition of the patient has deteriorated. I am saying this because we had left an economy in fine fettle when we had demitted office in May 2004. Thus if some short and long term problems are afflicting the economy today, they are clearly the products of the last four years. The most important achievement of the NDA regime was the breaking of the vicious cycle of high inflation, high interest rates and low growth, which had been a feature of the Indian economy in the past, and replacing it by the virtuous cycle of low inflation, moderate interest rates and high growth. Unfortunately, we seem to have returned to the old days of high inflation and high interest rates. Growth has held so far but there are clear signs of the economy slowing down. Added to this is the problem of exchange rate management and monetary policy. The demand for essential commodities is inelastic and a tight money policy will not succeed in reducing their demand. But a tight money policy will surely impact adversely on consumer goods, housing and investment demand, which have been the drivers of the economy. High interest rates are also attracting larger inflows of foreign capital, leading to further appreciation in the value of the rupee against the US dollar. This in turn is affecting our exports adversely and increasing money supply leading to further inflationary pressures. In this background, the Budget which I would have presented would have concentrated on the following: My first task would have been to curb inflation. For this I would have taken a number of steps on the supply side to flood the market with commodities which are in demand, specially essential commodities. I would have replaced the minimum support price with a procurement price for wheat, rice and other produce so that our stocks were sufficient to influence market prices through the public distribution system. If this added to the burden of subsidies it could have been shared between government and the consumer. The very fact that government godowns are full would have a sobering influence on prices. The same could apply to edible oils. I would have invited the farmers to replace the loans they have taken from private moneylenders with loans from public financial institutions. Some may misuse this facility for fresh loans from the banks, but it is a risk worth taking. I would have also remitted the interest charges on all farmers |
