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 | | Monday, 25 February, 2002, 12:32 GMT India pledges economic reform  A rise in rail fares would be highly controversial India must accelerate economic reforms in order to achieve its targeted growth, President Narayanan told Parliament at the opening day of the budget session. The president said the reforms were needed to hit the 8% growth rate necessary to halve the number of people living below the poverty line over the next decade. But political observers say some of the more controversial reforms - including privatisation and changing labour laws - could be put on the backburner after the ruling BJP party was routed in four recent state elections. But Mr Narayanan's speech made it clear that the government is still determined to rein back spending on state-owned entities. Cash haemorrhage "It is evident that disinvestment in public sector enterprises is no longer a matter of choice but an imperative," said the president. "The prolonged fiscal haemorrhage from the majority of these enterprises cannot be sustained any longer."
But revenue from state asset sales has so far fallen way short of annual targets. Despite the economic slowdown, Mr Narayanan insisted that economic fundamentals remained robust, with the information technology industry in particular helping to spur growth. Top five India's economy is forecast to grow by 5.4% this year, putting the country among the world's five fastest growing economies. "However, this rate of growth is neither sufficient nor satisfactory," said President Narayanan.
Railway Minister Nitish Kumar will present his budget on Tuesday, and there has been some press speculation that passenger rail fares will be raised in order to trim subsidies. That would be a highly unpopular move in a country where 14 million people travel by train every day. Budget dilemma Indian Railways needs about $2.5bn of investment in the year to March 2003, according to a recent government study. And Finance Minister Yashwant Sinha will have a tough job cutting subsidies and generating more tax revenues in order to release funds for infrastructure development. The reduction of rail fare subsidies could also set a precedent for the removal of subsidies on food and fertilizer. Mr Sinha is due to unveil the annual budget on Thursday. | |
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