FM swears by reforms, vows to trim deficit

NEW DELHI: The markets might have given a definite thumbs down to the Common Minimum Programme (CMP) of the ruling alliance, UPA but finance minister P Chidambaram today swore, on his reputation as a reformer, that the CMP is a document of real reform that he will be proud to implement.
“It carries forward every single reform that has been launched since 1991,� said Mr Chidambaram, addressing the press in the Capital.
The CMP’s commitment to prevent misuse of double taxation avoidance treaties is not aimed at foreign institutional investors, clarified the FM. In fact, the CMP makes a categorical statement that FIIs will be encouraged. Some domestic firms have been found to be misusing these treaties and that will be ended. He will travel to Mumbai early next week to meet Sebi and market participants to clarify all doubts on this score. The FM used Budget secrecy and the as yet preliminary stage of converting CMP policies into government schemes to keep mum on any details. This, in turn, paved the way for some seemingly contradictory assertions.
The CMP calls for a big jump in expenditure, on public investment, health, education, subsidies, employment guarantee, backward states, etc. At the same time, it promises fiscal discipline. Mr Chidambaram insisted that it was not impossible to both find resources for the expenditure commitment and to stick to the path of fiscal rectitude. But how? That you’ll find out in the Budget.
Similarly, interest rates will be such as to please both the saver, who likes interest rates to be high, and the investor, who wants lower rates. Again, the details of how this wonder will be worked remain a secret for the time being.

Tax rates will remain stable, and pro-growth. The proposed cess for education will be applied on those who can afford to bear it, not on all. Its objective being the laudable one of raising the educational standards of our future generations, the FM argued, nobody should crib about it.
Foreign direct investment will be boosted, to $12bn to $15bn. PSUs will be given autonomy, managerial and commercial. The Navaratnas, big nine PSUs identified by the United Front government of 1996-1998, will stay in the public sector, as also the insurance companies LIC and GIC and the nationalised banks.
Review of the Electricity Act does not mean abandoning power reform. Unbundling of state electricity boards is not a pre-condition for private participation in generation and distribution. The CMP seeks both greater state funding and private investment in the power sector.
Mr Chidambaram refused to divulge any details on the CMP promise to unearth black money. There could be more than one scheme and they need not be tax amnesty schemes on the lines of the Voluntary Disclosure of Income Scheme (VDIS) that he had announced in 1997.