The Montek Singh Ahluwalia Chat
Montek Singh Ahluwalia had a fine bunch of questions to answer. And though he irked some because he picked his answers so carefully, he covered many aspects of the upcoming budget.
Mr Montek Singh Ahluwalia(Fri Jun 5 1998 7:10 IST)
Hello everybody I am here to answer your questions
Deepak (Fri Jun 5 1998 6:49 IST)
To Mr. Ahuluwalia. Sir, The SSI exemption limit for Refrigeration and air-conditioning Industry is kept very low in comparison to other SSI units. Sir, What's the logic behind such step motherly treatment to this highly employment generating industry which is also under the threat from Foreign Multinational Cos. Sir, this industry has been begging for a equal status with other SSIs for long. Can their dreams of equal status be fulfilled
Mr Montek Singh Ahluwalia(Fri Jun 5 1998 7:13 IST)
Deepak: The low exemption limit for air-conditioning in the SSI sector is a reflection of the fact that this is a high duty item and a quite a lot of SSI production tends to reflect assembly operations aimed at avoiding duty. The efficiency of many of the SSI units is also somewhat low because equipment is not well balanced. We want to avoid too much excise benefits to this sector.
Sujata (Fri Jun 5 1998 7:13 IST)
Was it on purpose that you created a hornet's nest around the finance minister regarding the price of petrol, the NOR and various other sectors?
Mr Montek Singh Ahluwalia(Fri Jun 5 1998 7:15 IST)
Sujata: The petrol price confusion was unfortunate. As the Finance Minister's speech makes clear the increase was only to be Re 1. The excise duty changes were meant to be absorbed in the oil pool account.
goel (Fri Jun 5 1998 7:15 IST)
BJP had gone to town on defending the INR at 40 but today it closed at 41.80? Where are we headed from here?
Mr Montek Singh Ahluwalia(Fri Jun 5 1998 7:18 IST)
Goel: you shouldn't judge the quality of economic policy from marginal variations in the exchange rate. Foreign exchange volatility is high in many markets. There is no particular merit in running an exchange rate policy which fixes a particular value of the rupee. It is better to accept marginal variations in response to market pressure while remaining ready to deal with speculative pressure. That is what the RBI is doing.
chandy (Fri Jun 5 1998 7:17 IST)
can we please have a definition of an Indian insurance company?
Mr Montek Singh Ahluwalia(Fri Jun 5 1998 7:20 IST)
Chandy: In seeking a definition of an Indian company you probably want to know about the role of foreign equity. An Indian company clearly means a company registered in India and also controlled by Indian shareholders. Whether some foreign equity can be allowed as a minority holding is not known at this moment.
Vivek Rao (Fri Jun 5 1998 7:19 IST)
Sir can you please make a brief statement on the impact of the sanctions? What is being done to (a) lobby for reducing the impact and (b) what is being done to cope with the fallout. Thank you
Mr Montek Singh Ahluwalia(Fri Jun 5 1998 7:28 IST)
Vivek Rao: As far as the sanctions are concerned it is difficult to make a precise quantification of the impact because the full extent of the sanctions is not yet known. Technically only one country --- the US --- has imposed sanctions based on legal compulsions. These sanctions involve denial of US aid which is relatively small.
They also involve denial of certain types of technology imports, most of which was restricted in any case. They do not involve restrictions Indian exports to the US. They prevent US banks from lending to the government of India. But the government in any case is not borrowing from foreign banks. US sanctions are not meant to prevent lending by US banks to the private sector.
Nor do they prevent US investors from investing in India. The US is compelled to vote against loans from the world Bank, but the US doesn't have a veto in this matter. Some other countries have cancelled new aid commitments for the present.
However, we hope that over time there will be better understanding of India's position and these negative attitudes will change. On the whole as far private markets are concerned we feel that private flows will respond to economic fundamentals if the Indian economy and India's policies are seen to be investor friendly we will be able to attract capital from abroad and the effect of sanctions will be marginal
sainarasimhan (Fri Jun 5 1998 7:23 IST)
Mr. Ahluwalia: Don't you think it is time for the budget process to be made more transparent? I mean, India is now a more mature democracy and the people would like to discuss these things more before they are announced to the parliament as a surprise. So, why don't we make the budget process more democratic?
Mr Montek Singh Ahluwalia(Fri Jun 5 1998 7:31 IST)
sainarasimhan: I agree with you that the budget process should be made more transparent. The insistence of secrecy before presentations to Parliament is an established tradition. But I do agree with you that we may be better of if Parliament is willing to change it.
ravinder rao (Fri Jun 5 1998 7:29 IST)
Mr Ahluwalia, immediately after the Budget was presented, you said, ''The sensex crashed after Dr Manmohan Singh presented his three budgets. However, the growth rate went up during those years. In contrast, Mr Chidambaram's budget saw the sensex rising.... But the growth rate fell...'' Now the sensex continues to fall. Today, it fell by nearly 120 with FIIs dumping their shares. What are the reasons? Is the government still optimistic?
Mr Montek Singh Ahluwalia(Fri Jun 5 1998 7:34 IST)
Ravinder Rao: Stock market indices reflect short term sentiments and immediate perceptions. Our stock market also lacks depth and can therefore be moved for short periods with relatively limited changes in perceptions by some players. Our primary concern is to ensure that the real economy does well. If we achieve this I have no doubts that the stock market will get back to where it should be.
sanjaysub (Fri Jun 5 1998 7:31 IST)
cant the debt recovery tribunals for banks etc act independently of the courts? this might accelerate recoveries by banks.
Mr Montek Singh Ahluwalia(Fri Jun 5 1998 7:36 IST)
Sanjaysub: Debt recovery tribunals are independent, of course. We hope to increase the number of such tribunals to improve recoveries in future.
Ajoy (Fri Jun 5 1998 7:31 IST)
Sir, why is it that there is a forum for industrialists such as the Ambanis, Tatas, Godrejs and the rest to be able to have a direct communication or indirect (FICCI OR CII) with the Government but businessmen like ourselves who return to the country after long years abroad only on a patriotic binge, are left holding on to almost nothing. Is it not time that the Ministry of Industry & of Finance give us an opportunity to represent ourselves more easily?
Mr Montek Singh Ahluwalia(Fri Jun 5 1998 7:39 IST)
AjoY: If returning NRIs want to have a separate forum, my advice is to set up an organisation of such NRIs. The government has announced a package for NRIs and I am sure representations from an NRI association would receive full attention
ANIL AGRAWAL (Fri Jun 5 1998 7:39 IST)
traders are exempted from 8% DUTY
but will they be allowed to pass
cvd they will pay on their imports while selling in local
market
Mr Montek Singh Ahluwalia(Fri Jun 5 1998 7:43 IST)
Anil Aggarwal: Yes. Traders can pass on the normal CVD which they pay to their customers.
raoraja (Fri Jun 5 1998 7:35 IST)
common man's investment in stocks and shares completely locked up for the past 3-4 yrs. had a hope through this budget. contrary to expectation market is further going down? will there be good days or never?
Mr Montek Singh Ahluwalia(Fri Jun 5 1998 7:50 IST)
Raoraja: Here are some general points which would be of interest to all of you.
1. Budgets are important but they cannot do everything, so we shouldn't look to the budgets for the solution of all problems. Many problems not dealt with in the budget will be addressed later in the year.
2. The main task of this budget was to reverse the slowdown in the economy last year. This is to be done by stepping up investment in infrastructure and also encouraging a number of important sectors such as agriculture, housing and information technology.
3. The budget gives a clear signal that the regime of moderate rates of direct tax are a permanent feature of the economy. This has become a multi-party consensus and should reassure investors.
4. The budget gives a strong message to foreign investors that we want to double foreign investment in two years.
5. The budget has a major package for NRIs who have long wanted o participate in developments in India.
6. The budget gives a signal for continuing public sector reforms.
7. the budget seeks to improve the macroeconomic balance by reducing the fiscal deficit.
These are some of the major points. A lot needs to be done in other areas hopefully we will be able to do so in the course of the year.
Suman (Fri Jun 5 1998 7:49 IST)
Mr Ahluwalia: In your opinion why situation like S-East Asia cannot develop in India? Can you tell us what are the positive factors of India that we cannot go bankrupt like S-East Asian countries? Especially, because the Indians were always told to liberalise their economy like the S-East Asian countries?
Mr Montek Singh Ahluwalia(Fri Jun 5 1998 7:52 IST)
Suman: there are important differences between India and the South East Asian countries. I would refer you to the economic survey brought out by the finance ministry for a detailed explanation.
chandy (Fri Jun 5 1998 7:35 IST)
Mr. Ahluwalia - I am from Business Standard and we are very interested in an answer to this question = the union budget does not have an estimate for the monetised deficit or the extent of support from RBI to the government borrowing programme? Can we have the estimate?
Mr Montek Singh Ahluwalia(Fri Jun 5 1998 7:56 IST)
Chandy: Your concern with the figures for the monetised deficit is understandable. We have decided not to give a specific figure because the monetary policy is something for the RBI to decide. Please remember that the monetised deficit figure doesn't mean very much because there are other sources of monetary expansion. e.g. RBUI credit to the banks, changes in CRR, and changes forex reserves. Without knowing all this the monetised deficit figures itself is not a good indicator of monetary expansion
man (Fri Jun 5 1998 7:54 IST)
montek how far will the rupee depreciate ?
Mr Montek Singh Ahluwalia(Fri Jun 5 1998 7:58 IST)
Man: The finance ministry does not make comments or predictions on movements in the exchange rate. Our focus is on producing a good macro-economic environment, encouraging investment, removing infrastructure constraints and allowing the RBI to manage day to day developments in forex markets
anu (Fri Jun 5 1998 7:57 IST)
Mr Ahluwalia what are views about the hike petrol prices? Don't U think it will lead to higher Inflation?
Mr Montek Singh Ahluwalia(Fri Jun 5 1998 8:2 IST)
Anu: The hike in the petrol price is now only Re1/litre this is being used to fund road development. I don't think that the one rupee increase will make much difference to inflation. However better roads will contribute to easier movement of goods which will help moderate prices.
Sanjai (Fri Jun 5 1998 8:2 IST)
Mr Ahluwalia: To what extent can India compensate for the loan suspensions by seeking alternate sources of capital?
Mr Montek Singh Ahluwalia(Fri Jun 5 1998 8:3 IST)
Sanjay: You are right we can respond to loan suspensions by seeking alternative sources of capital. That is why we are focussing on creating an environment which will increase investor confidence
Mr Montek Singh Ahluwalia(Fri Jun 5 1998 8:5 IST)
Everybody: I regret I have to leave now. Thank you all for participating in the chat show. I am sorry I was not able to answer all your questions, However many of these are being answered by us in one interview or the other. Thanks for taking an interest in the budget.
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