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NEW DELHI, May 17

INDIA prepaid the most expensive external debt component amounting to $500 million during 2001-02 as part of its prudent external debt management policy, the Lok Sabha was informed by the Finance Minister, Mr Yashwant Sinha.

Responding to a specific supplementary raised by Congress member Mr Jyotiaditya Madhavrao Scindia during the question hour when he sought to know whether there is any pride in being ninth among the top 15 indebted countries of the world instead of being one of the least indebted countries, the Finance Minister concurred with him. Mr Sinha hastened to add that successive Governments since the early 1990s had managed the external situation so well that in terms of percentage of GNP to external debt and short-term debt, the situation today was not alarming and "there is nothing to worry and no question of bankruptcy".

Mr Sinha noted that the external debt management policy of the Government focuses on external borrowing from only multilateral and bilateral sources concentrating on concessional and less expensive debt, keeping the maturity profile of the total external debt under manageable limits, restricting short-term debt, prepayment of more expensive external debt, encouraging non-debt creating financial flows on capital account and exports and invisibles on current account.

To the main question raised by BJP member Mr A. Narendra, the Minister said that in the last three to four years external situation was highly volatile as its root and ramifications were in the East Asian crisis, which was primarily caused by short-term debt. Mr Sinha said that in the case of India, short-term debt has come down from 3.5 per cent on March 31, 2002 to 2.8 per cent on September-end 2001.

When a member asked about putting a ceiling on Government borrowings as provided under Article 292 of the Constitution, the Finance Minister said that "what worries him is the internal debt situation'' which is reflected in the rising fiscal and revenue deficits of both the Centre and the State Governments. He said that the Standing Committee of Parliament has already gone into the Fiscal Responsibility and Budget Management Bill, which is "under active consideration of the Government. When we are ready with our view we will come before the House".

"We have to get over the fiscal problem of the country and in order to reduce the overall fiscal deficit, revenue deficit of the Government must be reduced so that we have a better economic environment for growth and development," Mr Sinha contended.

When Mr Thomas (Kerala Congress) sought to know whether the State Governments could borrow directly from foreign lending agencies and bilateral donors, Mr Sinha said that the matrix of foreign loan is that the Centre gets proposals from both State Governments as also Central Ministries for foreign assistance. These are being put before the multilateral lending agencies and bilateral donors in which representative of the concerned State Government or Central Ministries would be present. Once the loan negotiation is through, it is signed by the Government of India with the concerned foreign agencies.

He said that once the loan is granted, the Government of India in turn lends to the States by way of additional central assistance on the same formula on which Central Plan assistance is provided to the States. Where there is cent per cent grant from foreign lenders the same is passed on as grants to the States, Mr Sinha added.

To a specific query from CPI (M) member Mr Radhakrishnan on the controversial ADB loan to the State of Kerala, which has led to resentment following proposals to retrench Government staff and other stringent measures, Mr Sinha said that "he has great admiration of the way in which the State Government has handled the fiscal problem''. He said that no one needs to be told, leave alone outside agencies, "to put our fiscal house in order''. He regretted that the way State after State was facing fiscal problems, the situation could not be allowed to go on. He singled out the Government administrative expenses deficit of the States which had zoomed from Rs 32,000 crore in 1996-97 to a massive Rs 88,000 crore in 1998-99 as a sequel to the Fifth Pay Commission award. That is why, he said, the emphasis was on pruning establishment expenses, right-sizing the Government and raising taxes and "if the Kerala government is doing these things, there is nothing wrong in it".

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