New Delhi, Dec. 20: The Indian government today said it had sufficient reserves of foreign exchange to last out a two-year war in West Asia, which could disturb its trade links with the world and its ability to earn hard currencies.
“Our reserves at $68 billion are comfortable enough to last us up to two years, in case the conflict (in West Asia) takes place and drags on,” finance minister Jaswant Singh today told newspersons in an informal chat here today.
Singh said the US secretary of state Colin Powell’s statement today — that Iraq’s arms declaration was a “material breach” of UN resolutions — was “worrying”.
The statement was a portent of how things could move, the minister indicated. Except for oil prices, which India could not control, it was “in a comfortable situation”, iterated Singh.
Singh’s statement is significant as India is one of the regional powers the US has been keeping in close touch with on the West Asia situation. Sources said the Indian government has been closely monitoring the situation and has been holding inter-ministerial meetings on stocking oil and food reserves, besides stockpiling other strategic material, supplies of which might be disturbed in the event of a war in West Asia that could affect shipping routes.
Powell had made his statement after two top UN weapons inspectors said there was little new in the 12,000-page document released by Iraq under a UN resolution demanding that it end its suspected weapons of mass destruction programme or face serious consequences.
Singh, however, admitted skyrocketing international oil prices — ruling at $ 30 a barrel — and gold prices, which had moved up to $ 300 an ounce, would impact the Indian economy. A war would worsen the situation, he said.
The finance minister also said interest paid out by pension funds, currently at 9.5 per cent, will have to be eventually rationalised. “Yes, rates are declining. But as far as pensioners, retired persons and widowed are concerned, they are a high-risk category, and we are concerned about maintaining their returns,” Singh said. “But at the same time there is a need to rationalise pension rates.”
“Governance is about balancing interests between two just and equally important acts,” asserted the minister. This is being interpreted as a clear indication that he will stand by his earlier resolve to cut interest paid on the employees provident fund despite opposition from within his party.
Singh also said a buoyancy in tax collection had made the government hopeful that it would be able to maintain the level of fiscal deficit it had announced at budget time.
Till December 15, corporate taxes were up by 30 per cent, personal income tax increased by 12 per cent, excise by 19 per cent and customs duty earnings were up by 11 per cent, pointed out the minister.
Fears have been articulated that because of increased expenditure on various heads, including a Rs 8,000-crore relief package for drought-hit farmers, the government’s fiscal deficit would balloon to unmanageable proportions.