MR. CHAIRMAN: The House will now take up Item No.13. The time allotted is four hour. Hon. Members are requested to speak on the Demand and in brief so that maximum number of Members may participate in the debate.
"That the respective supplementary sums not exceeding the amounts on Revenue Account and Capital Account shown in the third column of the Order Paper be granted to the President out of the Consolidated Fund of India to defray the charges that will come in course of payment during the year ending 31st day of March, 2000, in respect of the following demands entered in the second column thereof - Demand Nos. 3, 5 and 6, 8 to 12, 15, 17 to 20, 23, 29 and 30, 33, 38 and 39, 42 and 43, 45 to 48, 53 to 55, 57 to 59, 62, 65 to 67, 69, 71, 73, 75 to 77, 79, 81, 83 to 85, 87, 95 and 101 to 103."
SHRI MANI SHANKAR AIYAR (MAYILADUTURAI): I would like to begin by congratulating the Finance Minister on the signs of revival which we have had the opportunity of seeing in the economy in the last few months. The stock market is booming as never before. Exports are showing signs of revival, indeed encouraging revival. The rate of inflation is at such a low level that some economists are even disturbed at how low is the level of inflation.
The Agricultural production, by and large, has been satisfactory. It has been particularly good in the area of foodgrains. The signs for the future, that is for the next six months, are perhaps even better than the performance of the last six months. On all these grounds, I think, the Government is to be congratulated.
But at the same time, I think, we have to ask ourselves the question whether the Finance Minister is able or lucky. At a personal level, I have known the Finance Minister for the last 30 years. We have had opportunities of working together as civil servants. So, with regard to his personal ability, I have no doubts nor wish to cast any doubts. But whether the signs of revival that we have seen in the last few months are sustainable or not, in those terms, I think there is no cause for euphoria and there is some cause for caution about the significance that we should derive from the indicators of things being a little better now than they have been for the last three years. I sound this note of caution on the question of revival because for one thing there seem to be very varying predictions about the rate of growth that the economy will actually attain in the current fiscal year. I have seen some rather optimistic predictions from the Finance Minister. We have heard somewhat less encouraging sounds from at least one member of the Planning Commission and economists -- as is the custom with economists -- do not always have a similar view on how things are going. What we can say is that the economy is likely to grow at a higher rate this year than it has grown in the last two-three years. How much better, I for one, would like to reserve judgement until we come to the presentation of the Budget and the receipt of the Economic Survey for the next fiscal year. At the moment, I would say that it is good that there are signs of recovery. But we should not let ourselves be overtaken by over optimistic predictions. Also, I think, we must not fall into the arithmetical illusion of thinking that it is rates alone that matter without taking into consideration the base upon which these rates are calculated.
The Finance Minister is lucky because his immediate predecessor's performance was so poor that it was possible for him to -- in comparison to himself in the year 1998-99 and in comparison to his predecessor in the two years that followed the fall of the Congress Government -- give an account of himself this year which could be a statistical illusion unless it is maintained into the future. My very best wishes to him for maintaining it into the future because if his performance is good, then the country's performance is good. I do not wish to deny the country the opportunity of growing because I wish to deny Shri Yashwant Sinha the opportunity to further grow.
Apart from the low base from which we have started and therefore, the indication that this might be something of a statistical illusion, I would also like to draw the Finance Minister's attention to serious sectoral imbalances which are there in the economy. At the beginning of the 1980s, to take one striking example, the second biggest Indian import after crude oil was edible oil. Then came the oilseeds technology revolution that was initiated in the Congress Government of 1985-89 and carried further forward in the period 1991-96 with such enormous success that India became a net exporter of the products of oilseeds. Now, within three years, we have reverted to the position which obtained nearly 20 years ago when edible oil has become a major import into this country. Not only does this have a serious adverse impact on the balance of payments but this flood of edible oil imports into the country is seriously threatening the green revolution that took place in the dry land which is where oilseeds are grown.
Similarly, we have seen what appears to us to be completely unwarranted imports of agricultural products like wheat and sugar which have also had an adverse impact upon our farmers. The first sectoral imbalance, therefore, to which I would wish to draw attention and underline is that the economy is doing much better for the industrial corporate sector than it is for the farmer, at least in terms of what Government policy is doing. The Lord has been kind and compensated for some of the Finance Minister's faults; we had a good monsoon and, therefore, production has gone up. But the performance of the Government of India in the last 18 months with regard to the farming sector has not been such as to enable the farmer to take full advantage of nature's kindness to him.
Within the industrial sector itself, there are some segments of Indian industry which have picked up extremely fast, but there are a lot of others which are virtually stagnating. These include several engineering industries and we have heard complaints particularly from automotive parts manufacturers as also from some industries engaged in engineering, particularly of the heavy engineering and structural engineering kind. Therefore, I would say that while overall figures might be encouraging in some respects, particularly in the manufacturing sector, there are segments of the manufacturing sector which seem to be in urgent need of special attention.
Also, we have a low rate of inflation today. But there is a serious danger that there could be a kind of cascading inflation that could come about over the next few months partly on account of the Government's financial imprudence in not being able to manage the fiscal deficit and partly on account of the rising international prices of petroleum products - I am thinking particularly of diesel - which could translate themselves through the economy into a much higher rate of inflation to the detriment of real economic growth. Consequently, I would sum up this survey, this thumb nail sketch of the Indian economy at midyear by saying that the economy is doing well, but the Government's finances are not doing equally well.
When it comes to the Government's finances, our attention must first go to the fiscal deficit. Now, there is no really knowing until the Finance Minister clarifies this as to what is the fiscal deficit that we are faced with in the current financial year. We began this financial year on the reassuring note given by the Finance Minister that he might be able to hold down the Central Government fiscal deficit to even perhaps four per cent. It looks as if it is going to be nearly six per cent and there is the danger that it could go even higher than that. Perhaps even more worrying than the Central fiscal deficit is the way in which the fiscal deficits of the States are going virtually haywire. We have already had a doubling, it would appear, of the fiscal deficit of the States as a percentage of GDP from around 2.7 per cent to around 4.3 per cent. Putting it all together it looks as if the real deficit of the governments in India, not the Government of India but the governments in India, as a percentage of the Gross Domestic Product could be ten per cent or above. That simply is unsustainable.
What worries me about the climbing of fiscal deficits of the States at a time when the Centre itself is unable to control its own deficit is the alliance politics that has now got institutionalised by the BJP-led National Democratic Alliance, for the NDA contains a large number of parties. They are significant really only at the level of one State or perhaps two States, not more than that, and the pressures that these parties will be exercising on the Central Government to not keep State deficits in check is a very real danger. We have already seen that in the current financial year the kind of cap that had been placed on the borrowing of the States in the previous financial year has been eased up.
I fear that in the interest of playing good politics, the Finance Minister might be persuaded to play bad finances. After all, he is not a technical appointee. He is a political appointee. He belongs to a political party which is part of a political alliance and this political alliance contains so many interests who are narrowly limited to their respective States. I think it would be in the interest of the nation as a whole to sound this note of caution that we have already seen an exponential increase in the contribution of State Governments to the overall fiscal deficit and it could get even worse.
The Finance Minister himself has very recently warned of India walking into an internal debt trap. Walking into that internal debt trap is likely to be accelerated rather than braked in consequence of alliance politics. Therefore, I would really, with all the power at my command, stress that the Central Government cannot limit itself only to concerns about the fiscal deficit in the Union Budget. The Finance Minister has no option but to address himself to the overall deficit in this country which includes the State deficits and therefore, to ensure that not only does the Centre keep its house in order but that it keeps its house in such order as to compensate for the gross disorder that is prevailing in the Finance Ministries of many State Governments.
Sir, at the end of the day, it is not in the stock market but on the shop floor that we are going to discover how really the economy is growing. The stock market is behaving in a bizarre manner. It is rising at a rate that bears is no resemblance whatsoever to the real rate of growth in the economy. When the Finance Minister was on this side in the other House rather than in the distinguished position in which he sits now, he and I had served together on a Joint Parliamentary Committee whose origins lay in a bizarre expansion of the stock market back in the first half of 1992. I would like to remind him of that and say to him that it would be inappropriate for him today as the Finance Minister to take more than a certain amount of satisfaction at the way the stock market is going. I do not think the stock market is reflecting the reality on the ground. Therefore, there is the danger of this bubble bursting and when this bubble bursts, I trust that he will not be caught saying that he lost little sleep over what is happening in the stock market.
In the light of this, I would like to state that we, in this side of the House, particularly our section of the House, are faced with a curious problem. We are being described as the BJP's "B" team in economic policy. That is hardly our fault. What the emperor has done is to steal my clothes. He came into this House in 1998 as a favoured son of the Swadeshi Jagran Manch. He gave us in his first Budget a resounding account of what it means to be Swadeshi. Over the next 18 months, he has said that he defines Swadeshi as Videshi. He has taken our policies and our programmes and adopted them as his own. We can naturally only endorse him when he abandons his own position to accept our position. But I do not think that means that we end,once he has finished exhausting using our clothes, as his "B" team for, then, he will have to invent his own policies and his own programmes.
Compared to the confusion over Swadeshi in his ranks, there is clarity in our ranks over our economic policy as stated at Pachmarhi. We have reaffirmed at Pachmarhi our belief in the socialistic pattern of society as enunciated at Avadi. We have reaffirmed our faith in the mixed economy and we have reaffirmed our belief in planning for development. I am deeply concerned over the growing nexus between this Government and big business. We have had captains of industry announcing at the end of an election that they would wish to have this particular gentleman as the Finance Minister.
Now, given my own personal relationship with Shri Yashwant Sinha, I can confide in the House that I am very happy that he has been reappointed as the Finance Minister of India. He is an able man and particularly given the quality of talent in his party, he is an exceptionally able man. However, when we have a situation in which leaders of industrial conglomerates, like the Confederation of Indian Industry, not only appoint but anoint the Minister of Finance, inform the Prime Minister that this is their particular preference. then, it makes for concern. For if we do not have any apprehensions about the role of business in the life of our nation, then we might as well hand over the governance of this country to the Confederation of Indian Industry. But so long as there is a role for the State in controlling and regulating the corporate sector for people to become Minister of Finance on the basis of good chits issued to them by the head of an organisation like the CII, is, I think, undesirable.
I do not think our current Minister of Finance invited this endorsement. But since he has received it unsolicited, I think it is in the interest of the country as a whole that the Ministry of Finance should keep its distance from the corporate sector. And the keeping of that distance is not much in evidence as revealed by the Finance Minister's former Economic Adviser which demonstrated that. This nexus on television...
SHRI RUPCHAND PAL (HOOGLY): I will just remind the hon. Member about the speech made by their leader, Shrimati Sonia Gandhi, in a recent meeting of the She has been accusing the industrialists why they should not be closer to the Congress Party.
SHRI MANI SHANKAR AIYAR : I promise that I will send the hon. Member a copy of the speech of the Leader of the Opposition with notations underlining certain words so that he can better understand what she said instead of relying on Ganashakti's reports about what the Congress President stated.
I am only drawing attention to this because of the attempt being made by the corporate world to project itself as being extremely close to North Block and the lack of an attempt on the part of North Block to keep at least a dignified distance between itself and the members of the corporate world.
We have had in the last 18 months disturbing examples of the Ministry of Finance, in collusion with other Ministries concerned ,playing with things like tariffs and referral prices. We saw this with respect to steel. We then had seen it with respect to wheat just now. We have also seen it with regard to sugar. The WTO certainly does oblige us to increasingly open up the market for imports into India. But it has not taken from us the right to utilise tariffs as a way of protecting the Indian economy or of protecting our security.
In attempting to protect the economy, a major step was taken a few days ago by the Minister of Finance in announcing a 50 per cent tariff on the import of wheat by roller flour mills. This was a decision which could have been taken partially or fully at any time since May, 1999. It was deliberately postponed for six months before being brought into effect. Why? There is cause for legitimate concern here. Is this the consequence of the close relationship between the corporate world and North Block which is growing or is it happenstance or is it negligence on the part of the Government? I do not know which it is. But the industry itself and agriculture have been crying themselves hoarse for the last six months that wheat imports are taking place at a time when there is such a glut of wheat in our godowns that the new crop is not being picked up adequately and prices are rising in the market. Therefore, when we see this happening in steel, when we see this happening in wheat, we see that sugar imports were continuing into this country from a country with whom we were at war - the WTO itself provides that on security considerations you can cut off, without further ado, trade 17.00 hrs.
One wonders whether the game being played by the Finance Ministry at the behest of other Ministries, including the Prime Minister's Office, is really in the economic interest of this country or in the political interest of this party. That is why we would like to have clarifications which will enable us to believe that there is an honest Government functioning here in the national interest and not a dishonest Government functioning in the interests of the corporate sector.
Sir, when I look at the Budget that the hon. Finance Minister presented several months ago, I could not have said this has my electorate had not the kindness to elect me the Eleventh or twelfth Lok Sabha, I couldn't, therefore, I am taking the advantage of saying it now.
Ten paragraphs of his speech were devoted to the agricultural development of India, the rural sector. Something like 90 per cent of his speech was devoted to the corporate sector. It is not he who is reponsible for this as an original sin, his predecessors too have been increasingly giving attention to the corporate sector at the cost of other sectors of the economy. I think we must not allow disproportionate attention to be given to the corporate sector in the Ministry of Finance because if the Ministry of Finance starts dealing virtually exclusively with the corporate sector, then perhaps he should be redesignated as the the Minister of Corporate Affairs and we can have a quite different Minister to deal with the finances of the country as a whole.
What is necessary is for the Finance Minister to recognise that the State must not abdicate its responsibility to the poor, and we are a poor country. Two-thirds of our labour force is in agriculture but agriculture accounts for only one-third of our GDP. Therefore, the attention that you gave to the corporate sector, while it might dazzle the eyes by having a beautiful Hyderabad or a beautiful Delhi or a booming Mumbai, will be nothing as compared