The Hindu Business Line : Chidambaram hopeful of progress in financial reforms

Still optimistic: The Union Finance Minister, Mr P. Chidambaram, and the CII President, Mr Sunil Mittal, at the India Economic Summit in the Capital on Sunday. Admitting that financial sector reforms are lagging behind, Mr Chidambaram said he might be able to make some progress in pushing through reforms in that sector before the end of the current term of the Government.

Our Bureau

New Delhi, Dec. 2 Admitting that financial sector reforms are lagging behind, the Finance Minister, Mr P. Chidambaram, on Sunday said that he might be able to make some progress in pushing through reforms in that sector before the end of the Government’s current term.

Addressing the India Economic Summit, organised by the World Economic Forum and the Confederation of Indian Industry (CII), Mr Chidambaram underscored the need to push through reforms in banking, pension, insurance and also the unfinished agenda in the capital market.

Heart of economy

“Financial sector is the heart of the economy and we have not been able to push those reforms. That’s a disappointment. But I still think we have 16 months and we might be able to make some progress,” Mr Chidambaram said.

Commenting on the performance of Indian companies, Mr Chidambaram said that India Inc would continue to grow organically and inorganically and acquire leading positions in many sectors.

He identified refineries, steel, pharmaceuticals, aviation, steel, forgings and castings, telecommunications, and shipping as sectors in which Indian companies will in the medium term acquire leading positions in the world.

“While consolidation may not be taking place within Indian industry, Indian companies are acquiring businesses round the world, setting up manufacturing base around the world.

“In fact, in the last couple of years, the kind of acquisitions that have been made, our outward FDI was equal to nearly the inward FDI. This year it (outward FDI) is expected to be more,” Mr Chidambaram said.

Wary of new

Besides financial sector reforms, the other area of “great disappointment” for the Finance Minister related to the unwillingness among policy makers to experiment with new models to deliver goods and services.

“We have expanded wage employment programmes, expanded irrigation programmes, education-for-all programmes, and expanded health programmes, yet we are totally dependent on the tried and failed system to deliver results. We are unwilling to experiment with new models to deliver goods and services.

“We have made very little progress, say, in public private partnerships. We have made very little progress in finding alternative institutions to deliver goods and services rather than the rigid bureaucracy that we have,” Mr Chidambaram said.

Challenges

On the challenges faced in sustaining the high economic growth, the Finance Minister said that there was need to “keep the investments going”.

“Investment is key to growth. Investment to GDP ratio in 2006-07 was 35.1 per cent of GDP. In 2007-08, I expect it to be slightly more than 35.1 per cent of GDP.

“If I can keep investment-GDP ratio moving up from 35 per cent touching say 40 per cent in the next five years, which I think is perfectly achievable, I can see this growth continuing for the next 15-20 years. But the Congress party must be voted back to power (in a lighter vein),” he said.