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No need for mid-term fiscal correction, says Sinha

Gurdeep Singh in New Delhi

Finance Minister Yashwant Sinha today said that there was no need for any mid-term fiscal correction necessitating additional tax or other resource mobilisation.

Sinha said that though there is expenditure over-run due to the Kargil conflict, additional resource mobilisation is not required and that the fiscal situation is manageable.

''As of now, this is not necessary. In the past, we have managed such situations, where there have been expenditure over-runs. I do not expect that it will be necessary to mobilise resources other than the budgeted amounts,'' he noted.

There has been talk that in order to check the fiscal deficit target going haywire, the finance minister will impose additional taxes. Sinha had earlier stated that the Kargil conflict will put pressure on the fiscal deficit due to mounting expenditure. ''Now, the revenue situation has improved,'' he pointed out.

Sinha dealt at length to explain how Kargil will have only a limited impact on the government's Budget and the economy due its diversifed nature.

In reply to a question relating to reports that the United States will block the International Monetary Fund loan to Pakistan next month if it did not withdraw troops and militants from the Indian side of the Line of Control, Sinha said Pakistan had sought the loan before the Kargil conflict began. ''We (India) had supported it at that moment but it has been misused. We will keep this is mind when our views are sought on the next disbursement,'' he maintained.

When asked to explain what was meant by ''misuse'' of funds by Pakistan, Sinha said the reason why India had supported loan disbursement to Islamabad was because it felt that like any other country in need, it should be helped. ''But if you have such a fragile economy that you go with a begging bowl to the world, then waging a war is the height of the folly.''

Sinha said the government's borrowing programme was in line. ''I do not think that it would overshoot the target. If borrowings at the moment are high, it is because the government usually borrows more in the first half of the year, but slows down later.''

He said the government will go the whole hog on its projects, including the national highway project.

The minister found no cause for concern for the economy so far as the Kargil conflict was concerned. ''I see absolutely no signs of any absence of confidence or worry on the part of the Indian investor. The private sector has spoken in one voice that they do not anticipate or apprehend any ill-effects of the Kargil situation.''

Asked if the situation would remain the same, if there was no early end to the war, Sinha said: ''I do not quite understand as to what is implied by an 'early end'. As of now the assessment of industry and government is that its impact is within manageable limits.''

Sinha said the Pakistan economy was on a ''weak wicket''. The fall in the index on the Karachi Stock Exchange after the Kargil events was almost 28 per cent as compared to a rise on the Indian stock markets. ''The Pakistani citizen as well as the investor in that country was more critical of the events that have taken place than some people in India. This reflected a lack of confidence on the part of the Pakistan economy.''

The minister said there has been a lot of concern with regard to the Indian economy. ''This concern continues to persist. In all countries of the world, investment behaviour depends on the sentiments, the 'feel-good factor' being one of them. In the current situtation too, what matters is the confidence which is the bedrock of the economy."

In fact so important and all-pervasive is this concept that a consumer will buy only if he is confident of the product. In today's context, companies are looking as to how the stock markets behave and foreign exchange markets open. These become reflective of the confidence in the economy.''

Sinha said that in the last one year, the Bharatiya Janata Party government had faced enormous problems. ''The challenges during the year 1998-99 had been greater than ever before. The 1991 crisis was largely a result of problems within the system.... That is, the government did not manage its affairs properly.''

Sinha said when he took over as finance minister, the main problem he faced related to kick-starting the economy. There was a slow-down and dark predictions about its revival. ''The roaring success of Resurgent India Bonds helped build confidence,'' he said.

Then came the global economic crisis, which engulfed many countries like Japan, Russia and Brazil. It became worse and affected India's exports and eventually the industrial production.

''The government had hardly overcome these problems when we were overtaken by political events. Even when the government was coming to grips with fresh elections, the Kargil conflict started.

''However, such events do not overwhelm the economy because of its huge and diversified character. Everything cannot be explained by statistics. The strength of such an economy lies in the production taking place in each and every village. It is not easy for the our economy to collapse.''

UNI

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