Financial reform policy soon: FM

He said the target is to hit zero revenue deficit by 2008-09, through expenditure control and higher tax compliance. But five separate kinds of deficits block the ambitious growth possibilties.

Fiscal deficit and revenue deficit, trade deficit, an investment and savings deficits, a policy deficit and a deficit in governance, he listed before the audience.

‘‘First, we have to complete financial reforms, where policies are still in the making for banking, insurance, pension and capital markets,’’ Chidambaram said. ‘‘But unless tax revenues go up and the tax-to-GDP ratio improves, there is no way of bridging the fiscal and revenue deficits,’’ he warned.

The FM said tax rates have been lowered and the administration improved to ensure higher collection, even as it promotes savings.

National savings, the FM said, must go up from today’s 28.1 per cent of GDP as should the investment rate, from today’s 26.6 per cent. Higher savings in the private sector and households are also necessary, he said.

‘‘The trade deficit, now at $30 billion, must not be allowed to become the albatross,’’ Chidambaram said, advocating greater international investment by way of FDI, ECBs, remittances, ECBs, service sector and tourism earnings. He was non-committal on opening up of the retail industry.

‘‘Policies are always in the making in India. We have not unmade any policy but we are always in the process of making policies — though policies do need to be reviewed in quick succession,’’ he told the audience, asking for it to assist in consensus-creation to quicken reform.