Months of uncertainty ended this week, as Prime Minister Atal Behari Vajpayee and his Cabinet members came out clearly with economic policies which they plan to follow.There was also good news in that the Congress Party, the largest in the Opposition, said that it would support the Government on measures which would improve the state of the economy.Ever since the United Front government had fallen and fresh elections were announced, the state of the economy had everyone worried. The emergence of a BJP-led Government did not spark too much hope in the heart of industry. While several BJP leaders had made their views on the economy known, it did not give a clear picture of what the party intended to do. Swadeshi may have been the favourite phrase, but it meant different things to different people. To some, it meant throwing out MNCs while to others it meant, keeping MNCs but protecting domestic companies.At the annual meeting of the Confederation of Indian Industry, Vajpayee unveiled a series ofpolicy measures which his Government would implement to take GDP growth to seven per cent. He said that FDI was welcome, and more so in infrastructure areas. replies to all proposals would be given in 60 days. Internal liberalisation would be speeded up. A commission would be set up to review all the administrative rules which governed industry and commerce. All such rules which were outdated or were being used as a tool for harassment would be scrapped or changed.The Government would put more money into infrastructure and tap funds such as pension and insurance for this purpose. All infrastructure projects which are over Rs 100 crore in size will be directly monitored by the Prime Minister's Office. Banking reforms would be priority and the non-performing assets of banks would be brought down.The agro-processing industry would be supported as that would help farmers get a better price for their products and at the same create employment and increase exports. The growth target for the agriculturalsector would be five per cent.Vajpayee said that there would be a new housing policy within 60 days. And to formulate a new information technology policy to boost the growing computer and software business, the Government would set up a National Information Technology Task Force within 30 days. Power Minister P R Kumaramangalam also did his bit by setting in motion tariff reforms in power sector. He announced that the tariff fixing powers of the central and state governments had been taken away by the setting up of Central Electricity Regulatory Commission and State Electricity Regulatory Commissions. These commissions would be set up within three months as the Government had issued an ordinance to this effect. These independent bodies would set tariffs and advise on power policy.The Power Minister also said that the minimum tariff would be 50 per cent of the cost of generating power. Agriculture sector has been given three years to adhere to this rule. Later if the Government wants to subsidise thesector, it will have to give a cash compensation to the power generator.Credit policyThe Reserve Bank of India recently announced a set of measures including a one per cent reduction in bank rate and several sops to exporters. However, the much-expected cut in cash reserve ratio (CRR) and measures to improve farm credit did not find a place in the credit policy for the first-half of 1998-99. To boost sagging exports, RBI Governor Bimal Jalan cut the pre-shipment export credit up to 180 days by one percentage point to 11 per cent and restored the export refinance limit of 100 per cent on the outstanding export credit over the February 16, 1996 level offering banks a cushion for their export lending. The one percentage point cut in bank rate (the rate at which the RBI lends funds to banks) and repo (repurchase agreement on Government securities) is expected to trigger a decline in lending and deposit rates of commercial banks. Some banks have already announced cuts in lending rates.
