PM to reforms rebels: Sorry, we MUST do it

On the issue of FDI, RSS chief K S Sudarshan had wanted all those sacked who were for the opening up of the country to FDI. The PM’s message couldn’t have been clearer: ‘‘We need greater inflow of FDI to supplement our domestic resources.’’

The plan has targeted domestic savings levels to rise to 26.8 per cent of GDP (it’s 23 per cent right now) — but since we need an investment level of 28.4 percent of GDP by 2007, the gap has to be made up from foreign investments. If these don’t come in, GDP growth will get hit.

Interestingly, Fernandes today indicated that he had softened his stand on the matter as well, and a solution may be in the offing. Since Fernandes had raised the issue of private monopolies, government companies like ONGC and GAIL may be allowed to bid for HPCL and BPCL — they would, however, have to be junior partners in a consortium.

As to whether the plan targets were achieveable, the PM made it very clear that very major reforms would be needed if any progress was to be achieved. Today, instead of saving, the government’s overspending amounts to a figure equal to 4.5 pc of GDP. This has to be brought down to 0.5 pc of GDP. While this sounds easy, it means the Centre will have to make big cuts in subsidies and other wasteful expenditure.

Similarly, tax collections will have to be increased considerably, from the present 8.6 percent of GDP to 10.3 percent. Since the only way the tax base can really grow is if industrial growth recovers, the PM said ‘‘it is for this reason that we have to effect labour reforms’’ (the Shiv Sena today threatened to walk out of the NDA if labour reforms were carried out).

Other major reforms that the plan document said were essential include major agriculture reforms, removing inter-state barriers to trade, and so on. Without taking these decisions, the plan target cannot be met.