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January 19, 2000


The Rediff Business Special/Gurudas Das Gupta

'Govt is selling the jewellery to pay the grocer'

Gurudas Das Gupta Once we used to discuss the matter of investment related with growth, growth related with human welfare and employment generation. Just see how the situation in the country has changed drastically.

Today, we are discussing the divestment policy of the government. It has been envisaged that all our national assets should generate resources to meet the budgetary deficit because we do not have any other alternative.

A policy had been formulated, but the policy could not be implemented. A target was fixed, but the target could not be reached. A Commission was appointed, but the Commission has been disbanded, it is a sordid story of mal-administration and mismanagement of our valuable national assets.

send this business special feature to a friend Whatever assets our predecessors have built up are being put on sale, but no new assets are being created. Since the federal finances are in a shambles, we have to sell our family jewellery to meet the grocer's bill!

That is where the country has been taken to, by the policies that are being followed.

It was in 1991 that Manmohan Singh talked of divestment. It was said that there should be a sale of 20 per cent of the government equity in the public sector undertakings to pay for the budgetary deficit and the equity has to be sold to mutual funds, financial institutions, including banks.

At that time, the economy was critically ill. In 1996, the United Front government talked of transparency, talked of orderly divestment, appointed a Commission, and it is useful to recollect that the United Front government called for investment of the yield of divested equity for human welfare, for education, for health, particularly, in the rural and backward areas.

The government that followed, the present government, having a National Agenda, also spoke of swadeshi (economic self-reliance) thrust being given to the economic growth. They also declared that India is to be built by Indians.

Unfortunately, the finance ministers who had come to office in the successive governments since 1991 had hardly paid attention to the formulations that were made at the beginning. That is where the crux of the present problem arose.

It is useful to recollect that the Divestment Policy as envisaged earlier had conceived of investment of the yield in projects of greater national importance.

A number of points are relevant, extremely relevant. What are they?

It is essential that an appropriate valuation of shares' earnings is made. Is it being done now? Will Yashwant Sinha or the newly-appointed minister looking after divestment kindly respond?

The second appropriate question, utilisation of the fund. In successive Budgets, estimate that the government would like to raise through divestment is, at the moment, Rs 443 billion. How has the government performed? Till today or till yesterday, the total yield realised is Rs 182.88 billion. What a shortfall! What a non-performance!

Where are the reasons to be found? In this year's Budget, my friend, Yashwantji, who, I have said once, knows more politics than economics, has been able to collect Rs 10 billion out of Rs 100 billion. The total yield is around Rs 200 billion.

Where has the money gone in a poor country like India? The money has gone down the drain. In a country where the largest number of poor people in the world live today, in a country having, maybe, the largest volume of illiterate people in the world, the money was not spent to build up the social infrastructure. There has not been an improvement of the productive infrastructure, not a single power station was built; not a school was set up; not a hospital was established; not even a metre of rural road was constructed. The economic fundamentals have not improved. Or the yield has not been utilised to improve the economic fundamentals.

We cannot say that the process of human development has improved with the fund that has been generated. Look at the economic situation. Where has the country gone? Actually, the gross fiscal deficit is higher than the budgeted estimates. In 1998-99, it was around 22 per cent higher than the budgeted estimates. According to the figures furnished by the Controller of Accounts, in June 1999, tax and non-tax receipts have declined. The government borrowings have become disproportionately high. Only in the months of April and June, the government has borrowed 47 per cent of the total yearly borrowings.

The gross fiscal deficit for April 1999 was Rs 163.55 billion as against Rs 123.55 billion in April 1998. The widening crisis must have been accentuated by the Kargil war and its subsequent developments. The country has not been informed till now as to what has already been spent. We have not been transparent.

Therefore, it is estimated and there is an apprehension that the financial crisis must have been accentuated gravely. I have been referring to the figures supplied by the Controller of Accounts for the month of July 1999.

What does the latest report of the Reserve Bank say? It says that the economic recession continues unabated. The deceleration in industrial production has been as low as never before. There has been contraction in manufacturing growth, fall in power generation marginally, decline even in the much glorified service sector.

In a situation of unmitigated economic crisis, unmanageable fiscal gap and unprecedented mismanagement of federal finances, divestment has become a convenient tool for a government which has already mismanaged the economy.

The question before the nation is that it is merely squandering away the assets that the previous generation had built up. Thousands of working people in the country had produced these assets. It is a sign of inept handling of the national finance. It gives a wrong signal of creeping insolvency.

The Disinvestment Commission has been disbanded and it has been substituted by a government department. Arun Jaitley has been made the in-charge of this department. The most pertinent questions are: Why don't you delink divestment from the Budget itself? Why is it not being delinked? Why don't you set up a separate fund that will foster national growth?

That will bring about improvement in the process of human development of the country.

Part II: Liberalisation under the controlled coterie of bureaucracy

Gurudas Das Gupta is the leader of the Communist Party of India in the Rajya Sabha, the upper house of Parliament. The article is based on a short-duration discussion in the Upper House.


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