WEF paints gloomy picture of econonmy

New Delhi, Nov 27: "Together the fiscal deficit of the Centre, states and losses of public sector units (PSUs) would add to about 12 ...

New Delhi, Nov 27: "Together the fiscal deficit of the Centre, states and losses of public sector units (PSUs) would add to about 12 per cent of GDP. This is just unsustainable for the Indian economy," Claude Smadja, Managing Director of WEF, told the India Econonomic Summit, organised by CII and WEF.

"The Government had to roll back the increase in prices of some of the petro-products despite Finance Minister Yashwant Sinha’s unwillingness," Smadja said adding that such political pressure would increase the expenditure and translate into dismal fiscal scenario.

Achieving a growth rate of nine per cent or higher is easier to talk about than achievable, he said adding "you need to take hard decisions like doing away with subsidies and speedy implementation of economic reforms launched nine years back."

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He, however, described the communication sector as the only "bright spot" in the Indian economic reforms in the last nine years and asked the government to take similar decisions in areas like banking and financial sector, privatisation of PSUs, power sector reforms and opening up of infrastructure sector.

Appreciating the Government decision to bring down Government ownership to 33 per cent in the banks, Smadja said a clause restricting investors not to accumulate more than one per cent of the equity in banks would keep the issue of management control unaddressed.

In the power sector, government has virtually failed to bring any reforms except for devising a new scheme of securitisation of dues from the state electricity boards (SEBs) to the tune of about Rs 8,000 crore.

"SEBs are bankrupt and running on loss with no improvement in reforming them. Centre will have to take hard decisions to make them financially viable," he said.

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Smadja came down heavily on government’s policy of subsidy in various sectors including water, electricity as well agricultural sector. Free water and electricity are not benefiting the people who actually needed these subsidies, rather it was going to the affluent farmers.

"So the question is not whether India should continue with the economic subsidies or not, but how India should allocate its resources efficiently to meet the demand of every sector," Smadja said.