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Government is taking all possible steps to enhance public and private investment for promoting economic growth and poverty reduction in the country. This was stated by Minister of Finance, Shri P. Chidambaram while chairing the 1st Meeting of the Parliamentary Consultative Committee attached to the Finance Ministry, here today. He said that an enabling environment is necessary for attracting investment, as well as proper infrastructure and larger investible resources. He said that the Prime Minister has also made it very clear that a favourable investment environment is necessary for economic growth. Asserting that revenue deficit means dis-saving, the Finance Minister, emphasized that both the Government and the public sector must save and public expenditure should be reduced in order to free resources for investment.
Shri Chidambaram stated that the Government was committed to promoting Public Private Partnerships (PPP) for infrastructure development. He said that PPP has now become an important tool the world over. Recent developments in the infrastructure sector including roads and ports were good examples of such partnerships. Government has therefore proposed to set up a special ‘viability gap funding’ facility to support PPP projects. Most of the infrastructure projects have a long gestation period and may not be fully viable on their own. Financial viability can be ensured through a mechanism that provides Government’s support to reduce project costs. He said that to qualify for viability gap funding the projects must be implemented with at least 40% private equity in the following sectors: roads, railways, sea-ports, airports, power, water supply, sewerage and solid waste disposal in urban areas and international convention centres.
Responding to issues raised by the Members during discussions, the Finance Minister stated that bank credit is very important for investment in different sectors, but the Government as the owner of the public sector banks should only play an indicative role. In the past many banks had become sick and unviable because of directed lending. Only after such requirements were lifted have banks emerged stronger and more successful and we have to make them still stronger, Shri Chidambaram added.
He disclosed that present trends indicated that the number of education loans this year would far exceed last year’s number. He also disclosed that institutional credit to agricultural sector will also meet and perhaps exceed the target fixed for this year. The target of providing loans to 100 new farmers per branch in the agricultural sector will be achieved fully.
The increase in the off take of non-food credit in the current year is indicative of the substantial increase in investment, he stated. Non-food credit as on 31st October, 2004 amounted to Rs.1, 11,058 crore compared to Rs.46, 546 crore in the corresponding previous period, the Minister stated.
On the infrastructure front, the Finance Minister admitted that though there have been some bottlenecks in ports, particularly at JNPT. However, he indicated that this was also because of a 35% growth in imports and a 25% growth in exports in the current year, which is a healthy sign for the economy. The highways sector was slack in the first quarter and is now picking up. The slack was because of the delays in awarding contracts in the first quarter due to the operation of the electoral code of conduct, he clarified.
The Finance Minister stated that a healthy debate is going on for utilization of foreign exchange reserves. Some respected economists have argued that the foreign exchange reserves should be used for infrastructure investment, while others are not in favour. He assured the members that a final decision will be taken only in consultation with the Prime Minister.
Shri Chidambaram thanked the Members for broad support for the ideas of the Ministry and their constructive suggestions which included reduction in public expenditure and deficits; upgradation of infrastructure facilities especially ports; airports and roads; increasing the flow of bank credit to agriculture and the rural sector, and SSIs; greater emphasis on entrepreneurship training and development; providing more opportunities for employment to unemployed educated youth in urban and rural areas; and simplifying rules, regulations and procedures for setting up new units.
Minister of State for Finance, Shri S.S. Palanimanickam and senior officials from the Finance Ministry were also present at the meeting.
Among the Members who attended the meeting were S/Shri L. Rajagopal, R. Prabhu, Rameshwar Oraon, K.V. Thangka Balu, M. Sreenivasulu Reddy, Angadi Suresh Chanabasappa, Mohammad Salim, Narendra Kumar Kushwaha, M. Ramadass, D.K. Adikesavulu, Mohan Rawale, Jivabhai A. Patel and Dr. C. Krishnan from Lok Sabha and Sh. Murli Deora, Gireesh Kumar Sanghi, Jairam Ramesh and M. Rajasekara Murthy from Rajya Sabha.
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