Deficit and Disinvestment

Deficit and disinvestment


This refers to your editorial on the captioned topic( Business line,July!7,2009).
The approach of the Finance Minister to tap the disinvestment route to partly make up the borrowings Rs 400,000 envisaged in the budget is welcome. It is also heartening to observe that SBI capital could manage to tie up more than Rs 70000 crores through debt syndication and structured finance in the first quarter itself indicating a shift in investment climate to high gear.

These are only indications that there are resources in the economy and the government and other intermediaries have to initiate appropriate measures to tap the resources .

There are umpteen ways for the Government to raise resources from both domestic and external market. The measures include well planned and scheduled disinvestment of capital of Public Sector Undertakings, leasing out waste lands belonging to Government, encouraging Public Private Partnership with built in incentives to attract private capital, resorting to massive external borrowings on the present and future strength of the economy and encouraging FDI in areas where investment is badly needed and not so far allowed on some technical grounds.

Prudence in Fiscal Management should continue to be the policy of the Government All said, the proposed borrowing will have its adverse effect in the economy in the form of higher interest rate, inflation and less money for private investment.

(This appeared in Business Line on 20/07/09.


Dr.T.V.Gopalakrishnan