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UF policies failed to kickstart flagging industry: Chidambaram

Union Finance Minister Palaniappan Chidambaram conceded on Friday that the last Budget presented by him and the associated credit policies failed to kickstart flagging industry. He blamed the Congress for creating the political uncertainty which caused the slowdown in industrial activity.

Addressing the the Confederation of Indian Industry's partnership summit in Madras, he said, "Which other Indian finance minister has seen the government brought down for no explicable reason within 30 days of the Budget and also seen the next government brought down on an untenable issue within seven months thereafter?"

He said the United Front government's economic policies were right. However, the right policies might not be sufficient and the country needed a stable policy environment and a government that would sustain the reform process to dispel the uncertainties, he added.

He said to keep inflation low and release resources for productive investment, the next government would have to steadily reduce fiscal deficit by cutting explicit and implicit subsidies, containing the wage bill, broadening the tax base and improving tax administration.

Answering a question from the audience, he said there was no scope for competitive devaluation in tune with the East Asian countries. He conceded that it might take away the country's competitiveness in exports in certain sectors and believed that this would be only for a short period.

Replying to another query, he said the only way out for Indian exporters was to find new markets and improve the quality of their products.

He conceded that due to the devaluation of the neighbouring countries's currencies, Indian exports might suffer.

Chidambaram said that capital account convertibility could not be held responsible for the South-East Asian crisis. ''It was just one of the many factors.''

He allayed fears that going in for CAC would put the rupee at the mercy of speculators. Devaluation risks occur, said the finance minister, if the CAC is beyond eight per cent, and the private sector borrowing is unregulated. Both these situations were not present in India, he pointed out.

Chidambaram insisted that the Indian government had a good roadmap to follow regarding the CAC. ''We will closely monitor the signposts as we go along. We will not move forward until the current account deficit is controlled.''

Referring to the whopping success of the Voluntary Disclosure of Income Scheme, he said, ''If I were to leave politics, I would become an advertiser!''

UNI and Amberish K Diwanji in Madras