The Hindu Business Line : Deficit and disinvestment

This refers to the editorial “Deficit and disinvestment’ (Business Line, July17). The Finance Minister’s approach to tap the disinvestment route to partly make up the borrowings of 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 70,000 crore 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 them.

There are umpteen ways for the Government to raise resources from the domestic and external markets. 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 been allowed so far on technical grounds.

Prudence in fiscal management should continue to be the government’s policy.

All said, the proposed borrowings will have its adverse effect on the economy in the form of higher interest rate, inflation and less money for private investment.

T. V. Gopalakrishnan e-mail

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