Chambers back Govt.'s economic management

By Our Special Correspondent

NEW DELHI, AUG. 9. The country's leading industry associations today came out in strong support of the country's economic managers in the wake of downgrading of India's credit rating by two global credit rating agencies. The associations cast doubts about the reliability of the ratings and felt the agencies have not disclosed any unknown fact about the country's economic fundamentals. However, they conceded that India must push ahead with economic reforms at a faster pace and become more serious about the growing fiscal deficit.

In a statement, the Federation of Indian Chambers of Commerce and Industry (FICCI) said the two agencies are known to follow each other in their evaluations. The assessment has been more cosmetic than fundamental. However, the North Block should grab this opportunity to re-launch the reforms programme with greater vigour and create a new image for India as a leading emerging investment destination. ``Indeed, in sharp contrast to the prognostications of the rating agencies, the rupee's real effective exchange rate has improved over the last one year and the external value of the rupee warrants some corrections. The external payments position is also comfortable,'' observed FICCI.

It reiterated that the Indian economy would turn around by the end of the year with normal monsoon expected this year. The budgetary situation, which has admittedly slipped in the first four months of the current fiscal, was expected to improve substantially this year.

The Associated Chambers of Commerce and Industry of India felt that soon after S&P's, it is unfortunate that Moody's has joined them in downgrading India's currency rating. It is true that India's macro-economic fundamentals are weakening but `fortunately' these have not eroded, said the Assocham President, Mr. Raghu Mody. However, Mr. Mody said the message was loud and clear. The Government must shift priority to economy and gear up its implementing machinery at all levels with greater accountability and transparency. The reform process must be completed and government should be only a facilitator rather than regulator.

The Assocham chief called for addressing the crisis of credibility that runs right through the entire system of economic management - from the reliability of key macro-economic data to the twists and turns of the policy formulations, and to the infirmities of institutional or regulatory system.

He said there had been far too many instances of frequent policy modifications. This had happened practically with respect to each and every new policy initiative of the last few years, ranging from the so-called privatisation (disinvestment) to labour reforms; from fast track power projects to the new telecom policy; from Fiscal Responsibility Bill to administered price mechanism for petroleum products; from Intellectual Property Rights legislation to reform of bankruptcy/insolvency legislation.

Mr. Mody said there was need to beef up the inadequacy of institutional and regulatory system which unfortunately had brought about at regular intervals a series of scams in the financial system. What has euphemistically been described as `systemic failures' have, in fact, acted as `speed breakers' in the progress of reforms.

The Assocham chief lamented while the evolution of a political consensus of reforms was vital, there was evidently a sharp conflict of perceptions, not only between the ruling coalition and the major opposition parties but also among different constituents of the ruling coalition and the major ruling party itself.

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Section  : Business
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