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February 5, 1998


Issues' 98/R H Patil

'What will we do with roads, railways and ports if we do not have industries?'

Investment in every sector must be the most important criterion of the new government.

Today, the ongoing recession in our country is because of the slowdown in investment.

We Indians are only good at talking. After liberalisation so many power projects came to our country but hardly any of them has become operational till date. The government must realise that the power sector is the most important sector for investment. If we do not have power, how will we run the industries?

Our people's attitude is to debate a lot of non-issues. For instance, till this date, there is a debate going on whether we need foreign investment only in the infrastructure sector or other sectors also. We should understand that even if a foreign company is investing in different sectors, Indians will benefit from the surplus generated.

Foreign investors will have to pay all kinds of taxes to their surplus produce to the Indian government. Moreover, they are going to create jobs for the locals which will again create employment opportunity.

I would like to say another thing to those people who say that we need investments only in infrastructure. If we build up infrastructure, we need production of goods also. Because merely having roads, railways and ports is not enough. What will we do with roads, railways and ports if we do not have industries?

A lot of debate is going on about Swadeshiand Videshi. Some parties are asking why do we need videshi goods when we have swadeshiindustrialists. These parties must realise that competition always brings out excellence. Moreover, Indian industrialists will always have an advantage over the foreign industrialists since they are more accustomed to the local environment. Also, you cannot ignore the fact that the foreign companies always have high costs of production which Indian companies do not incur.

Another imporatant point I would like to raise is about the bureaucracy and environmentalists. The bureaucracy must change their babu attitudes towards investors. The environmentalists are also to be partly blamed for the slowdown in investment. They file writ petitions against companies which invest in our country. These things should not be encouraged as this is a big hurdle in the investment procedure.

The new government must have some clean-cut policy about such things. After all, investors are not willing to go to the courts every now and then if an environmentalist files a writ petition. A project which takes five years for clearance in India takes only two years to get cleared in South Korea.

Luckily, in our country the economy was moving like a turtle rather than a tiger as in the South-East Asian countries. It is difficult for our country to face the same kind of situation because we do not have surplus dollars like they had. The surplus dollars create a tension in the system which becomes difficult for the government to control. Another mistake which those countries did was that they encouraged short-term borrowing which we never did in our country. So the bubble burst in those countries.

But we cannot ignore the achievements of those countries. We need to grow at a much faster rate. After all, the deficit which we incur is too much. The target of budgetary deficit of our former finance minister, Dr Manmohan Singh was three per cent to the Gross Domestic Product. But at this moment, the central government's deficit is 5.5 per cent to the GDP and if you add the state governments's deficit, it comes to nearly nine per cent of the GDP, which is very high.

Luckily, every political party is projecting a pro-liberalisation image. But things have to be done at the ground level, because the investors are not going to wait for long. They have other countries to invest in. Why will they waste their time in India?

R H Patil, managing director, National Stock Exchange, spoke to Syed Firdaus Ashraf

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