Cut non-Plan expenditure, subsidy to revive economy: Assocham

Listing his prescription for the ailing economy, Singh pointed out a three-pronged strategy involving disinvestment in public sector, downsizing and cutting non-planned expenditure and subsidies.

He called upon the government to set up a re-deployment fund to provide a safety net to the workforce that will be needed to be retrenched prior to embarking on the divestment process.

“Even at rockbottom prices, the government will get Rs 1.50 lakh crore. Why not ask the companies who retrench to make 20 per cent contribution towards such a corpus. A task force could oversee the entire process,” according to Singh.

In reply to a question onwhether it will be wise to divest given the prevailing stock prices, the incoming Assocham chief said “prices is a fallacy. Waiting for them to go up is a gamble. So what if the government sells today at 30 per cent less. At least you can use that money to improve the economy.”

Similarly, subsidies, he said form 14 per cent of the GDP. Of the total subsidies, 80 per cent are enjoyed by the middle class. The government should therefore immediately rationalise subsidies so that these reach the vulnerable sections alone, he said.

On insurance, Singh felt that it was a small issue which has been turned into a “unecessary and unfortunate controversy. It is just like any other subject and most apprehensions are unfounded, he added, while suggesting that the government should be open to allowing 100 per cent FDI in insurance companies of over Rs 500 crore as it is not a strategic industry.

Making an impassioned plea for speeding up the reforms, Singh said the government correct the fundamentals and quicklyimplement the policy decisions already taken.

“Reform process has to be brought in focus and speeded up for the benefits to trickle down to the lower strata. Once that happens, the opposition to reforms will also stop and necessary growth will automatically correct some of the problems the economy is in,” according to Singh.

“It has reached the present situation because the government has not been acting fast enough. What we need today are gutsy decisions and fast enactment of all the pending economic bills,” he said.

A human face to reforms is very badly required, otherwise the country will get into a bigger mess that has not been percieved by anybody so far, he felt. Referring to the vast unemployment problem, Singh warned that if the government did not address it soon, it will lead to a unmanageable problem of law and order problem.

Without delay, the government should focus heavily on areas like housing and construction which are not too capital intensive and have maximum scope for creatingjobs, according to him.

“The government has taken good steps in recent past, but private investment in construction of roads or highways will continue to remain meagre in the short-term. Hence, there is need to increase planned allocation which has been drastically cut by the government in recent years,” Singh felt.