CALCUTTA: The IMF feels that India should give top priority to streamlining the public sector and cutting Government expenditure before concentrating on other areas of economic reform.
Talking to members of the Indian Chamber of Commerce in Calcutta last week the Funds senior resident representative in India Charles V A
Collyns said that further efforts needed to be made to let the private sector into areas hitherto kept outside its reach. Some such sectors were telecom power and insurance for a free private sector would help s general more employment besides other attendant benefits the official said. India could no longer afford to protect the jobs of 20 million people in the organized sector at the cost of millions of others. Either way it would be necessary to clarify the context in which the private sector was expecting to operate.
Lifting of restrictions especially on the import of consumer goods would be absolutely essential to make Indian Industry more competitive. Collyns however felt that not much had been done to spread the benefits of the reforms to the agricultural sector since their main thrust had been towards industry. This situation needed to be corrected since in the final analysis everything from employment generation to growth-would depend a lot on agricultural prosperity. Questioned of the deleterious effects of the IMF-advocated rise in food grain prices on the poor he said prices could be raised gradually. But there was no point in persisting with massive subsidies since they almost never percolated down to those who needed them most. Besides overhauling the public distribution system was a must.
Collyns said continuing with the reforms was the only way to boost the growth rate from the presently sluggish 4% ta more competitive 6.8%. Aspects of the country’s labor policy thus needed to be made more flexible Controlling inflation on the other hand would only be possible by checking the fiscal deficit. Rise in inflation was largely caused by the huge infusion of foreign capital in recent months.
AS a result base money supply Spurted by nearly 30%. This was why he said the IMF was looking for tighter fiscal policies especially because of a fiscal slip of 2.5%.
The IMF official said that though the Fund was concerned only with India’s macro-economic policies he was only too aware that the success of the reforms depended on how they were implemented by the States. It was true that the Indian economy had shown dramatic improvements but it was nothing compared to the changes wrought in some counties in Latin America. As for the IMFs continued unpopularity in India Collyns said it was less unpopular in India than in some other places. But given the country’s encouraging performance the Funds future role would increasingly be an adversarial one.
Article extracted from this publication >> May 13, 1994
