The Telegraph
Since 1st March, 1999
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Delhi pep talk for feel-bad market

New Delhi, May 28: Greeted by that sinking feeling on the stock market at lunchtime, P. Chidambaram tried the time-tested talk therapy finance ministers apply in bad times by declaring that the common minimum programme unveiled yesterday was “bold and brave”.

The market, which has been giving the new government a rocky ride, expressed disappointment with the programme (CMP), driving down the Bombay Stock Exchange sensitive index 223 points to 4835. The finance minister’s midday pep talk did not appear to have had much of an impact, at least in today’s trading.

At a hurriedly-called news conference, Chidambaram said: “The premise on which the common minimum programme is based is that we will do everything possible to keep the economy on the growth path of 7-8 per cent, more if we can.”

“Once the growth rate kicks in, everything will fall into place.... Foreign direct investment flows will be doubled, financial markets will be deepened, the market issues to be offered by strong PSUs itself will help do this, and FIIs (foreign institutional investors) will of course continue to be encouraged.”

He proceeded to deliver several calming messages to the market, even announcing a trip to Mumbai shortly to meet FIIs, which are said to be selling on fears of economic reforms slowing down, and business leaders.

“Early next week, I intend to visit Mumbai. I will carry the government’s commitments to reforms. I will answer all lingering doubts,” Chidambaram said.

Other than apprehensions about reforms, investors also see the programme adopted by the United Progressive Alliance as the basic document for governance as long on promise and short on delivery. “Investors have taken a very pessimistic view,” said Navin Roy, of the brokerage Taib Securities.

“What’s worrying is that the sensitive index closed at the weakest point, indicating that there’s more to come,” he added.

In that case, Chidambaram’s early next week trip to Mumbai may have to be as early as Monday, when the market reopens after the weekend break.

The finance minister tried his best from Delhi itself, addressing investor concerns about the fate of public sector divestment. “Only those PSUs which can earn profit on a sustained basis in the face of global competition will be retained by the government,” he said.

The statement was seen by Left trade unions as going beyond what the programme adopted by the United Progressive Alliance contains. Citu leader M.K. Pandhe said: “This will not be allowed... global competitiveness is World Bank language.”

However Pandhe may see it, Chidambaram’s language today was clearly aimed at calming fears the programme has triggered. The winding up of the disinvestment ministry has been seen as a signal of slamming the brakes on sale of government holding in public sector units.

Chidambaram, playing on his credentials as a reformer, emphasised that he was going to be the man in charge. “I will implement the policies of the CMP that any privatisation will be considered on a transparent and consultative basis.”

The proposed education cess is another element of the programme that has caused concern that tax rates would go up. Chidambaram said: “Any burden will fall on those who can bear it.”

“Please remember, the cess by definition is earmarked for education of our children, our grandchildren and the boys and girls who drop out after class V. So, I don’t think anyone can question the purpose of the cess.”

He also reaffirmed the programme’s commitment to keep tax rates stable and favourable for growth.

The promises to make large public investments in agriculture and infrastructure have been viewed with scepticism because of questions about the source of money, given the large gap between government expenditure and revenue.

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