Tensions with Pakistan not to affect India's fiscal deficit

Monday, 30 September 2002, 07:00 Hrs
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WASHINGTON: Indian Finance Minister Jaswant Singh has staunchly defended the strength of his country's economy, insisting that the current border tensions with Pakistan would not affect the government's fiscal deficit.

"I have the first hand knowledge and experience of both -- what the current defense budget is and about the management of the defense budget. It will not, and I will not permit it to, add to the fiscal deficit of the government of India," Singh said at a press conference here Sunday at the end of the World Bank-International Monetary Fund (IMF) annual meetings.

"Absolutely, the first requirement of security is economic security."

To the criticism in certain quarters of the Bank about India's growing fiscal deficit, Singh said: "We must understand that when we talk of the fiscal deficit, three quarters of it is the revenue deficit."

Singh defended the pace of implementation of economic reforms, saying it was a sovereign decision. "If we are to be guided all the time by subjective preferences of what you have cited as certain investing community, then very readily come to my mind certain countries, I don't want to cite, which have demonstrated very fast pace."

He said these countries had come to grief. Those who were critical of India in the past for the delay in the field of capital account convertibility now cite India as a model to be followed.

Singh said the slowdown in disinvestment should not be seen as a setback to the reform process. "What the government has done is to order a review of what had been done so far and set the course for the future."

He said in a global climate of uncertainty, India and China continued to stand out as islands of stability and growth.

Singh said the fundamentals of the Indian economy were sound. To drive home his point, he said the country's "balance of payment position continues to mount. Current account deficit is less than one percent."

He said the inadequate monsoon had affected certain parts of Karnataka and Rajasthan, but "I believe at the end of the kharif (summer) crop, the decline in the agriculture production will be marginal".

Singh no doubt appreciated the need for reduction in fiscal deficit and lessening of the debt burden but said it was premature to draw the conclusion that the growth of the economy had slowed.

Commenting on deliberations of the Bank-IMF meetings, he said both multilateral institutions and participants were very eloquent about what needed to be done, but there was a wide gap between what needed to be done and what actually had been done and this gap had to be narrowed.

Singh said the finance ministers of the group of 20 countries would meet in New Delhi in November and discuss this crucial issue there.

About refusing aid for the country's primary education programme, Sinha said the Human Resource Development Ministry would be happy to work with the Bank if its funding came directly to it.

"We do not encourage the World Bank assistance going directly to the states. For primary education, the Bank assistance should be rooted through the government of India. That is the constitutional position," he said.

He, however, added the ministry had sufficient resources to carry out the Sarva Shiksha Abhiyan, or Education For All Campaign.

Source: IANS
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