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No alternative to reforms, says Jaswant Singh

Finance Minister Jaswant Singh, seeking to calm investors' doubts about the country's faltering reforms programme, said on Saturday he was committed to reforms to achieve better economic security and growth.

"Economic security is not possible without growth. Growth is not possible without capital and a dynamic capital market is not possible without reforms," Singh, told a gathering of stock brokers at the Bombay Stock Exchange, Asia's oldest stock exchange. "There is no alternative to reforms."

India has set a target of 8 per cent annual growth in its gross domestic product over the next five years.

GDP grew 5.4 per cent in 2001-02 (April-March), up from four per cent in the previous fiscal year, but way below the double-digit levels that analysts say is needed to wipe out poverty in the world's second most populous nation.

India started economic reforms back in 1991, but the process has lost momentum because of opposition from political parties, trade unions and the bureaucracy.

Singh's assurance came after fresh doubts about the reform drive crept in following a recent government decision to defer privatisation of two large oil firms due to political opposition.

Privatisation has been India's biggest stock market draw in 2002, with the state firms' benchmark index rising 87 per cent before that postponement, outperforming all sectors.

The early-September decision shaved over $14 billion from the stock market capitalisation while the index for state-run companies on the Bombay Stock Exchange has dropped over 10 per cent to 1,419.49 points.

India's Parliament is also yet to approve several key plans, such as cutting government stakes in state-run banks, labour reforms and legislation to curb the soaring fiscal deficit.

Analysts saw a ray of hope in Singh's comments.

"It is clear that the commitment to the capital market is total," said Raamdeo Agarwal, managing director at Motilal Oswal Securities.

Mid-year review

Singh told brokers he would undertake a mid-year review of the central budget during the forthcoming Parliament session, which begins on November 18.

"Along with that we would try and indicate the marker for the future," Singh said.

Singh said an ordinance to repeal the UTI Act was ready and after the Cabinet approved it, the nation's largest mutual fund manager will be bifurcated.

In August the government announced a bailout package for the cash-starved Unit Trust of India, covering a massive shortfall in its ability to repay investors in its largest fund, US-64, and 21 assured return schemes.

Under the package, the Mumbai-based mutual fund manager will be divided into two companies. UTI1 will consist of US-64 and the guaranteed return funds, and UTI2 the remaining schemes.

UTI, which manages half the Indian mutual fund industry's assets of about $20 billion, stunned investors last year when it froze redemptions from US-64 for the rest of 2001. It later partially withdrew the freeze, following a national uproar.

(With additional reporting by Denny Thomas)

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