The Telegraph
Since 1st March, 1999
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Give on FDI, take on selloff

New Delhi, Oct. 5: Prime Minister Atal Bihari Vajpayee today did what he does best: walk the tightrope. He changed tack on foreign direct investment and supported the anti-reform lobby by rooting for lower targeted inflows of $7.5 billion, but stuck to his stand on faster disinvestment and a substantially higher selloff target for the Tenth Five-Year Plan, which he cleared.

FDI and divestment have emerged as the two most contentious issues that sharply divide Vajpayee’s government.

The government has been under pressure to relax restrictions on foreign investment in aviation, real estate and financial services, particularly banking and insurance, to garner an estimated FDI flow of $20 billion a year.

Vajpayee told a meeting of the Planning Commission today: “We need greater inflow of FDI... but let there be no worry in any quarter that we would follow an FDI policy (which) would weaken Indian industry or hurt national interests. This will never happen.”

The Prime Minister reduced the FDI target from $8 billion fixed in the Tenth Plan’s approach paper by half-a-billion dollars to $7.5 billion.

He told Cabinet colleagues and Planning Commission members: “(There are) concerns about the role of FDI. I would like to allay all apprehensions on this front. We have to achieve our development goals by our own efforts and primarily by harnessing our own resources.”

The Tenth Plan, which aims at a GDP growth rate close to 8 per cent, is banking mainly on the huge savings by Indians — amounting to about 26.8 per cent of their income — being invested in the economy over the next five years.

Until a few weeks ago, Vajpayee was gung-ho about opening up the country to greater FDI flows and had indicated his support to finance minister Jaswant Singh and commerce minister Murasoli Maran. But political expediency has forced him to relent on some issues.

But the Prime Minister seems to have drawn the line on disinvestment. Although the Tenth Plan does not spell out the selloff method of state-run entities, an issue which has seen the Vajpayee Cabinet deeply riven through last month, it has stuck to an ambitious target of earning about Rs 78,000 crore through the sale of the government’s stake in state-owned companies.

Sources said the Prime Minister has made it clear to plan panel members that though the finance minister will try to accelerate tax reforms that could help the government earn more money, prune the size of the government and trim subsidies to save money, the high disinvestment target of Rs 16,000 crore which is factored into the Tenth Plan as a funding source for the plan will remain.

This is seen as implying that he has thrown his weight behind disinvestment minister Arun Shourie’s bid to hasten selloffs.

and go ahead with sales of several PSUs, including oil and telecom companies, which his Cabinet colleagues would like to save from the auctioneer’s block.

But Vajpayee remained his usual cautious self on the other issue that has proved divisive for both the ruling party and his Cabinet — labour reforms. He did not openly criticise the hire-and-fire policy advocated by some of his Cabinet colleagues, but mentioned that there was a real danger of unemployment shooting up and unless the economy could throw up more jobs, the situation would be “difficult to imagine, much less to tolerate”.

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