CAFE
COM:PORT
CHAT JOCKEYS
EVENTS

The Montek Singh Ahluwalia Chat

Samuel: I agree that the issue of poverty is crucial. But lets get the facts right. Data on poverty for the past 10 years show that as economic growth has accelerated in India, poverty has declined. What this budget will do is to stimulate growth and especially broad based growth stretching into rural areas. That is the best cure we have for reducing poverty. In addition we are increasing government expenditure on many of the social sector programmes which help the poor. Indian: About FERA what we have said is that the existing FERA will be replaced by a more modern legislation more intune with the requirements of a liberalising and more open economy. This will certainly help.

Killing time....Mr. Jefferson, poverty is a function of a society's attitudes towards it. Here in New York we are as indifferent to poverty and homelessness as we are back in India. Neither budgetary measures nor welfare reforms/tinkering is going to make a difference until a society/people's attitudes change, no?

I believe Bill Gates has been lecturing your prime minister and finance minister -- did he lecture you too? the man is nuts! -- about improving your communication facilities. He has a point you know. You have some outstanding talent in your country. But what use is it when everything is a government monopoly? Do you think a broad political consensus can be built about freeing govt corporations from govt control?

Hello again...Mr Ahluwalia...what do I tell my father who paid his taxes all these year? The crook for whom you made the VRS is a better person? Does my father get a refund or even an apology? A straight answer please, at 80 he sits next to me at 1130pm here, having paid his taxes for about 50 years now, and suddenly,,... VRS at 30% ???

Abhishek Varma 12:50 US time Mr. Ahluwalia, lately I have been reading reports about the growing economies tired of attracting FDI, and there is a negative benfit of globalisation is seen. How correct are these allegations?

Teesta: You are worried about subsidies. It is true that subsidies are still there in the budget. However, in a poor country you cannot entirely do away with subsidies. But the subsidies in our budget are only 1.1 % of GDP. And they are focussed on food and fertiliser. As long a s subsidies are controlled at around present levels, I think the budget can achieve the objective of producing seven percent growth with modest inflation. Ryan: Your point about the waste and corruption in social expenditure schemes is certainly valid. We are trying to make a major effort to improve monitoirng. The PM has emphasised seven basic minimum services as the top priority social expenditures in the system. Besides political decentralisation with controlled of expenditures shifting to levels of government nearer the people will ensure greater public monitoring and awareness. This will automatically improve performance, especially in a democracy where people's particpation is a relaity.

Mr Singh, why does appearing on a Chat like this interest you?

The more things change in your country the more they remain the same. What impression do you convey to the world when one ministry pases a project and another vetoes it. No pathbreaking Budget can erase the sour taste left in one's mouth by Enron or by the Tata-SIA affair.

Mr. Ahluwalia: What policy intiatives do you think will be required to catapult growth from 7% to , say, 10%?

Mr. Ahluwalia, wiil the petroleum sector be decontrolled, if yes, then when.

And I'd appreciate a response or two please...

Next question:The reforms are not even filtering past Udyog Bhavan and/or Shastri Bhavan... Example:I have a project for a CFS at Infra-I stuck...because the concerned Customs Commissioner feels, in his opinion, sitting at JNPT, that 'projected figures do not justify any more port expansion'...so therefore Transport, Railways, Finance, Commercxe...all at Infra under JS(Infra-I) have no choice but to agree...A Customs Commissioner decides growth now, also?? Bill Gates was right, he discovered what 'South Block and North Block' really meant...

Ellain: I know that people often talk of uncertainty about India's reforms. But the fact is that India has been steadily reforming for the past six years. At any given time something or the other may look uncertain and controversial but over this period the changes that have been made are enormous. The economy has also performed extremely well. We have had seven percent GDP growth in each of the past three years. There was a slow down in economic reforms in the last two years as we headed towards an election. However, there has been a sharp pick up in the reform momentum in the past two months culminating in the budget. Several initiatives have been taken and there is every indication that the systme is being moved forward again. As for ENRON, the controversy certainly setback the process of reform but the good news is that the various legal disputes have been resolved in favour of ENRON and the project is back on track. Ken Lay, the CEO of ENRON was in Delhi recently and was very satisfied with progress. Infact he put forward a proposal for creating another 10,000 mw of gas based power capacity. So, foreign investors are not necessarily frightened away.

You have now worked under Manmohan Singh and hri Chidambaram. Would you kindly tell us how different are their working styles??

.../

Mr Ahluwalia, Mog had a very interesting question, even I would like to ask you the same thing.

The reforms are not even filtering past Udyog Bhavan and/or Shastri Bhavan... Example:I have a project for a CFS at Infra-I stuck...because the concerned Customs Commissioner feels, in his opinion, sitting at JNPT, that 'projected figures do not justify any more port expansion'...so therefore Transport, Railways, Finance, Commercxe...all at Infra under JS(Infra-I) have no choice but to agree...A Customs Commissioner decides growth now, also?? Bill Gates was right, he discovered what 'South Block and North Block' really meant...

Harshad Mehta said in this forum two days ago that the BSE index will surge past the 7000 mark in December 1998. But the view on Dalal Street is that the big guys are pulling out as the widows and orphans rush in, enthused by your Budget. There is a feeling that the BSE will slump till the annual company results come in -- they are expected to be lousy, so the capital market will slump further. So where does that leave your plans to improve sentiment on the bourses? Or do you also not understand how the stock exchanges function?

All the foreigners who land up in India massage our egos and scratch our backs about how great India is doing and how India is the place to be. Honestly speaking how much of this is correct? On the other hand you hear that investment in the country of Malaysia outstrips us by miles and we are major losers? What is your opinion on this?

Golfing Mog: Tax amnesty schemes are always controversial and I can understand your fathers feeling as an honest tax payer. However, there was very extensive discussion on this subject and the idea of introducing voluntary disclosure scheme at the new maximum rate of tax recieved wide support including from chief ministers at the National Development Council. If it does yield resources these resources will go largely to the states and be used to fund basic minimum services which are in short supply. Do try to explain to your father. Nidhi: It is true that China attracts much more foreign investments today. BUt please remember that they have been at it much longer. In the first 6-7 years, of Chinas econmic reforms foreign investment inflows in to China were only around $1-2 billion per year. We haven't done too badly, Foreign investment in 1991 was a measely $ 150 million. This year. 1996-97 the inflow from all sources will be around $ 5-6 billion (including portfolio investment).

Pls tell us what you think of the Economist's recent sp feature on India?

Hello Mr. Ahluwalia: Is there any hope that the private sector will be allowed to contribute in the improvement of Basic Infrastructure? That seems to be the only hope for any form of reform that is so badly needed!(eg..Telecom, Roadways etc..)

What are the factors that could still undermine the reforms? Everyone in your country speaks of how the reformsn are irreversible. But we US investoprs are not sure. How can we be sure that the next government does not change its mind and throws Pepsi or McDonalds out, saying that they are non-essential areas? How can we make this process of investment in India a cast iron process? Why must investment in India be like Russian roulette?

Pls tell us what you think of the Economist's recent sp feature on India?

Hello Mr. Ahluwalia: Is there any hope that the private sector will be allowed to contribute in the improvement of Basic Infrastructure? That seems to be the only hope for any form of reform that is so badly needed!(eg..Telecom, Roadways etc..)

All the foreigners who land up in India massage our egos and scratch our backs about how great India is doing and how India is the place to be. Honestly speaking how much of this is correct? On the other hand you hear that investment in the country of Malaysia outstrips us by miles and we are major losers? What is your opinion on this?

There is so much happening in China on the infrastructure front that the mayor of Shanghai quipped that the crane must be declared the national bird of his city. There are 27,000 projects going in Shanghai at this moment of time. Do you see that ever happening in India?

A S Verma: In this budget, we made an announcement about decontrol of one part of the petroleum sector relating to new oil production. Larger issue of petroleum sector decontrol is the responsibilty of the ministry of petroleum. They are considering ways of moving towards a more rationale system of petroleum prices to be implemented in a phase manner. However, no formal decision on this has been taken so far. Indian: I would not like to make any forecast on what will happen to the Sensex. In the long run stock prices will reflect fundamentals and if the econmy does well so will the stock market. But predicting dayto day movements in stock prices is a hazardous business. We always feel that small investors should invest wisely and not rush in on the basis temporary moods and speculative surges. I do believe our stock markets are improving gradually and I certainly hope that we will not have uncontrolled speculation of the type you fear. In any case SEBI is there to make sure that markets are not manipulated.

n

There is a lot of competition between the states for investment. I was in India in January where I saw a very dismayed chief minister of Himachal, Mr Singh, express hbis resentment about how the smaller states were not getting any foreign investment because they had little to offer. How can the finance ministry help these states to compete or is that beyond the pale of your operations? I believe if that does not happen, India's federal structure could come under some stress.

All the foreigners who land up in India massage our egos and scratch our backs about how great India is doing and how India is the place to be. Honestly speaking how much of this is correct? On the other hand you hear that investment in the country of Malaysia outstrips us by miles and we are major losers? What is your opinion on this?

How much of the investments cleared by the government's FIPB has translated into actual projects? There is great concern that even though many many projects have been cleared by the FIPB, only 10 or 15 per cent have actually translated into tangible projects? Why is this happening? Is it because investors want to be sure that their projects will not run into political hurdles and bureaucratic obstacles?

Pls tell us what you think of the Economist's recent sp feature on India?

Sir:My father advises you that he will advise his grandchildren to let their brains and not their values dictate their tax-paying ethics, that is what he understands from your explanation, and he also says he understands, becaus he is aware that you, personally, have paid your taxes too, all your life (which is why you still drive a Maruti-800?). On the foreign investment angle is concerned, Sir, I think I speak with some knowledge : There is enough funding available in India, it just gets 'blocked' on the great buildings downhill of Raisina Hill, on either side. On infrastructure, do you know, Sir, that even something like the Rakesh Mohan Report is being ridiculed by people in these buildings? Do you know, Sir, that Bombay Port alone (not including JNPT) has more running feet of berth space than both ports in Dubai put together, but we are not permitted to put INDIAN money to develop INDIAN ports, so what will YOU do to help INDIANS? (NRIs and foreigners please stand in line after that.....)

Photographs: Atul Chowdhary