Sinha, major party leaders agree on economic consensus

Sinha said containing of both revenue and fiscal deficits was the most critical aspect requiring a consensus across various political parties. While the revenue deficit should be brought down to zero, fiscal deficit could at the most go up to two per cent which again should be used for productive purposes. "We should agree on a time frame to remove the revenue deficit," Sinha said adding that if fiscal deficit was allowed to exceed beyond 6 per cent, the country would be pushed into an internal debt trap.

Sinha said the centre and the state governments have agreed to sign memoranda of understanding to cut wasteful expenditure. While the centre would help the states in genuine financial difficulties, the problems arising from the structural issues have to be tackled by the states themselves.

Both Mukherjee and Yechuri endorsed the idea of fiscal discipline but pointed the ground level difficulties in achieving the objective. They raised the question of raising resources while attempting to bring in financial discipline. Mukherjee suggested that the institutional mechanism like the national development council should be made more enforceable.

On the question of subsidy, there was a broad consensus between Sinha, Mukherjee and Yechuri. They all wanted the subsidies to be better targeted as bulk of the subsidies were cornered by those not requiring them. The CPI(M) politburo member pointed to the "absurd anomalies" in the system.

Sinha warned that the revenue expenditure could not be controlled unless user charges for electricity, water and subsidies were not checked and better targeted. He admitted that the governments are compelled to conceal subsidies in the form of various concessions so that they do not face political criticism.

Mukherjee said broad areas of agreement on the subsidy issues could be worked out and the points of disagreement could be left aside. The finance minister also wanted a consensus on the financial sector reforms. The areas crying out for a political agreement include the insurance sector and banking. "Left to myself I should feel that even the public sector banks should be privatised," Sinha said adding that this was his personal view and not necessarily of either the government or his party.

On the question of labour reforms, the three leaders unanimously rejected the industry demand for hiring and firing. They argued that any comparison with either developed nations or China would be misplaced since there was a strong safety mechanism in those countries. Yechuri talked about the insurance cover for employees borne by employers in China for risk against losing employment. "Here we do not have any safety net," he said.