Sanctions effect will be felt after a year, says Sinha
Finance Minister Yashwant Sinha has asserted that the sanctions imposed by the developed countries after India's nuclear tests would not have any significant impact on the Indian economy in the current year, but its effects would be felt in 12 to 18 months time.
Commenting on the criticisms of former finance minister Dr Manmohan Singh and Lord Meghnad Desai of the London School of Economics that
the Budget had failed to take the sanctions into account, Sinha,
in an interview to a television channel, said, "They don't understand
the implications of the sanctions. He (Dr Singh) is anticipating too
many things at this point of time. I personally feel there is no need to create panic on account of the sanctions."
Sinha said the former finance minister, who was the leader of the Opposition in the Rajya Sabha, was not speaking like an economist but like a "politician."
"It is his dharma (religion) to criticise the Budget,'' he said. Dr
Manmohan Singh had stated that there would be an interim budget as
the present Budget had not taken the sanctions into account.
Sinha said his Budget was the first of its kind in the reforms era to go out of its way to recognise rural India and agriculture as central to the Indian economy. The criticism was from certain quarters such as people from the stock markets, foreign investors, and foreign institutional investments that have little interest in rural India.
On the divestment of 74 per cent of government shares in the non-strategic public sector, Sinha said both Dr Singh and Palaniappan Chidambaram had not shown courage to take this step.
On the charge that the finance minister could have set a timeframe for investment and a commencement date, Sinha said the first one was not possible while the second one was not needed.
He said divestment would depend on how the market behaved and the price the government was likely to get from the divestment. Four companies for divestment were already in the pipeline. "I am not going to sell my shares at any point of time at any price," he remarked.
Leaving open the possibility of foreign equity participation in the insurance sector, Sinha said he was neither ruling out nor acepting the participation of foreign equity in the insurance sector once it was opened up. This would be the job of the Insurance Regulatory Authority which would be set up later this year to determine what kind of companies would do business in this sector. The IRA legislation would be introduced in the winter session of Parliament, he added.
About the criticism that he had not taken enough steps to revive the capital markets, Sinha remarked: "Budgets are not made with the stock market in mind. No finance minister worth his salt will make a Budget for the stock market."
The finance minister accepted that some exporters, such as those in the engineering field or automobile components, would suffer due to the change in the price of steel.
"When you are preparing a Budget for a country like India you are faced with constituencies whose interests are at loggerheads with one another and there is no way in which you can satisfy them all. The steel industry in India is down in the dumps and if some other consumers were to destroy the steel industry, then to my mind it will be a very wrong policy to follow. The steel industry was in need of some succour," he said.
Asked his Budget speech would have been a different had he anticipated the criticism over his failure to pay more attention to sanctions or exports, Sinha said, "I wouldn't change it. No a word."
Sinha said his focus on rural India was not "obscurantism of any kind, it is good economic sense."
Replying to criticism that he had ignored the problems of Indian
exporters, he said the recent export-import policy had taken
care of their concerns, adding, "A few weeks later, I didn't really
have to re-emphasise that."
Elaborating on the impact of sanctions, Sinha said the only country in the world that imposed sanctions on India is the United States.
According to the Glenn Amendment, Sinha said no US bank would lend to the government of the country on which sanctions have been imposed. But, he pointed out, the Indian government was not in the market to borrow money from American banks and therefore, the government is not affected by the sanctions. Besides, the Americans have not yet defined the depth and spread of the sanctions, he added.
"What exactly they mean has not yet been defined by the United States. Other countries including the World Bank have deferred loans but nobody has said that projects which have already been approved will also be starved of funds," he said, "If sanctions are defined and imposed then we will stand up and take the country into confidence."
Asked why he did not present a best case and worst case scenario as some politicians and commentators had advised, Sinha said such a suggestion was contrary to how Budgets are prepared.
The minister said he was absolutely confident that the Budget recommendations about the insurance sector and divestment of public sector units would be passed without amendments. He said he had given up revenue of Rs 35 billion in trying to give export concessions in the export-import policy.
UNI
Budget '98
|