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RIBs a sign of India's inherent strengths and imminent turnaround, says Sinha

The government says its collection of $ 4.1 billion from the Resurgent India Bonds has exposed the assessment of credit rating agencies which had downgraded the Indian economy.

''We always said that we were right and they were wrong. Our faith in the economy has been vindicated by the $ 4.1 billion we ended up collecting,'' Finance Minister Yashwant Sinha said in a television interview.

The investment rating agency Moody's had recently downgraded the Indian economy.

Replying to a question about exchange rate fluctuations, Sinha said the government was working out a scheme by which the foreign exchange risk would not affect the country's fiscal deficit at any stage. He defended himself against the charge that the fluctuating exchange rate would mean that the country would end up paying a lot more for the bonds issue. Whenever the government borrowed in foreign exchange, it assumed a foreign exchange risk.

The finance minister also defended himself against the allegation that most of the money raised through the Resurgent India Bonds was hawala money. ''The scheme remained open for only 14 working days. If 75,000 non-resident Indians have been contacted in 14 days, then I've nothing to say.''

He said the newly formed economic panels set up by the prime minister's office were a sign of a new partnership between the government and industry. The government has been saying from day one that it wanted industry to be a partner in progress. The prime minister's initiative was part of the process.

''We expect the panels to give us advice at all times. We have shown confidence in industry, it is now industry's turn to repay that confidence.''

Sinha claimed that the spiralling rise in prices of essential commodities, fruits and vegetables has been halted, and that rising prices would not be an issue by the time for the crucial November assembly election take place in four states. ''In the next four to six weeks, the kharif crop should be in the market and the prices will start coming down.''

Sinha insisted that the price rise had nothing to do with the policies of his government.

''The price rise is largely due to the shortage of agricultural produce like potatoes and onions last year. Fortunately, we have had a good monsoon, and I expect the shortages to be overcome. Already the deceleration has begun and my own feeling is that we are over the hump,'' he said.

The finance minister admitted that there had been an economic slowdown, but maintained that the economy was now at a turning point. ''I think it is a self-defeating argument to say that investment is low because investor confidence is low. How will the economy grow? We in the government have accepted that private and public sector investment needs to be stimulated. Once public sector investment takes off, private investment will follow,'' Sinha said.

The finance minister said the government had two-fold approach at the moment to reviving the economy. ''First of all, we have to stimulate demand in those sectors which are stagnating. Secondly, once these sectors are revived it will increase confidence right through the economy. It is all about confidence at the moment,'' he said.

The finance minister, however, denied that he had ever set September as a deadline for the economic turnaround. ''I never set any date, but I did say that once the monsoon is over, construction activity will pick up, and the economy will revive,'' Sinha said.

UNI