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BHARATIYA JANATA PARTY National Executive Committee Meeting July 27, 28 & 29, 2001
Parliament Annexe New Delhi

Resolution on Economic Situation

The NDA Government under the able leadership of Shri Atal Bihari Vajpayee has initiated a number of innovative and timely measures to restore the health of Indian economy so that India becomes an economic power. Policy initiatives since the assumption of power in 1998, no doubt, resulted in the economy moving on the right track with bumper foodgrains production, overflowing food stocks at 62 million tonnes, revival of industry during the first two years, stable price level-inflation rate contained at around five per cent, comfortable foreign exchange reserves at around 43 billion dollars, export growth rate at over 20 per cent as against marginal increase in imports during 2000-01, and containing external debt at around 21.0 per cent of GDP in 2000-01 as against over 24.0 per cent of GDP in 1997-98 and 38.7 per cent of GDP in 1991-92.

While emphasising on the need to continue process of economic reforms, the government has amply proved its commitment to welfare of the weaker sections through various social welfare measures such as Antyodaya Anna Yojana - providing 25 kgs of highly subsidised foodgrains to the poorest of poor families, Sarva Shiksha Abhiyan, bank finance to meritorious students- bank loans up to Rs.7.5 lakhs for studies in India and Rs.15 lakhs for studies abroad, Janashree Bima Yojana, Annapurna Yojana - providing 10 kgs of foodgrains free of cost to senior citizens, insurance cover to agricultural workers, crop insurance, Kisan Credit Card etc. As a result of emphasis placed on the social sector development with special attention to health care, primary education, drinking water etc., there has been a remarkable improvement in the overall human development. Infact, the UN Human Development Index went up by 13 points during the period from 1998 to 1999 as per the latest data.

This trend would have continued but for an overall sluggishness in the world economy from which India cannot remain insulated. The economy has started showing signs of strain mainly due to external factors as well as certain inherent weaknesses within the system which need to be addressed on priority basis. During the current year, the economic situation is likely to improve due to normal monsoon in many parts of the country and the expected bumper food crop and consequent improvement in rural purchasing power. The party urges the government to step up public investment in order to kickstart the economy.

Decelerating trend in industrial production-observed of late--is not due to major bottlenecks such as industrial unrest nor raw materials shortage nor lack of investment friendly policy support. The slow down in the world economy is clearly affecting our exports related growth. In spite of slowing import growth, there seems to be a feeling of uncertainty in the market due to liberalisation of imports. Weakening of the purchasing power by the farmers mainly because of falling prices of agricultural produces (which provide nearly two-thirds of the domestic demand support) has also contributed to the economic slow down.

Time and again the party has been emphasizing the importance of the farm sector to overall economic growth. After the two years of bumper foodgrain production at 204 millions tonnes in 1998-99 and 209 million tonnes in 1999-2000, production declined to around 197 million tonnes last year mainly due to drought situation in many parts of the country. Though the current year is likely to witness another bumper foodgrains crop, that alone may not be sufficient to revive the economy. Therefore, the party urges the government to strengthen the purchasing power of farmers either by reverting falling prices of agricultural produces or reducing cost of agricultural operation and also effectively protect the agricultural sector from threat of imports. In this context the party suggests to facilitate free movement of foodgrains through necessary amendment to the Essential Commodities Act.

The Party welcomes the recent initiative taken by the Prime Minister to convene a Conference of all the Chief Ministers to discuss WTO-related issues in Indian agriculture. This first-ever Conference produced a useful exchange of views and prompted the Chief Ministers, cutting across party lines to pledge their support to the Centre in evolving a national strategy to face the challenges and seize the opportunities ahead. The BJP urges the Government to continue this process of broad-based consultation both at Central and State levels, and invite political parties and kisan organisations in future meetings.

At this critical juncture of Indian economy infrastructural projects could play a major role in revival of the economy. Pradhan Mantri Sadak Yojana for which Rs.5000 crore has been allocated till now could play a catalytical role in enhancing the rural purchasing power. To speed up implementation of this scheme, it is important to clear certain inherent bottlenecks such as the Forest Act, environment related laws, inordinate delay in acquisition of land etc.

Small scale sector and village industries have been making substantial contribution to the economy in terms of production, exports and job opportunities. With liberalisation of imports as per the commitment to WTO, this sector has been exposed to external competition. The party urges the government to initiate policy measures to promote this vital sector in order to enhance employment opportunities and exports. In this context, the party appeals to the government to come out with a comprehensive policy package at the earliest. The government may also consider redefining the small scale sector in terms of number of workers involved instead of investment limit. This would enhance productivity as well as ability of the SSI sector to compete.

The party appreciates the recent initiative by the Government to restructure the huge outstanding of the State Electricity Boards, which are in a very poor state of health. This is a part of the larger effort of the Government to introduce much-needed reforms in the power sector. The Prime Minister convened a meeting of all the Chief Ministers in March this year to drive home the stark truth that the absence of power sector reforms is badly affecting our agriculture, services, and industry. The fact that the country loses as many Rs. 25,000 crore in theft of power alone should make everyone aware of the gravity of the situation. A broad area of agreement among the States on power sector reforms has already emerged. The BJP urges all political parties to make common cause on the quick implementation of reforms in this vital area of infrastructure with people's participation.

It has been the accepted philosophy of the party that the government should play a role of facilitator of economic development and restrict its active participation to only the strategic areas. Keeping this stand in view and inculcate a culture of professional management in the existing public sector units as well as to mobilise resources for the purpose of retiring public debt and to promote social sector development, the party has been supporting disinvestment of PSUs. Though the NDA government has come out with clear-cut disinvestment policy, the National Executive Committee suggests that the government should make conscious efforts to realise maximum possible returns. It is also suggested that domestic companies may be preferred in case of disinvestment of PSUs.

The finances of all State Governments continue to cause serious concern. The need for a concerted and coordinated strategy between the Centre and the States to improve fiscal discipline, reduce wasteful and unproductive expenditure, and raise revenues has assumed unprecedented urgency. The BJP urges all the political parties to cooperate with the Centre in evolving a strong national consensus on this important issue, on which depends the prospect of sustained and faster economic growth as also our ability to maximize resources for development and people's welfare.

Mobilisation of resources is crucial for economic development. The average Indian saver is predominantly influenced by a precautionary approach rather than indulging in speculative investment in capital markets. Mutual funds started providing a via media to a large number of small investors who normally hesitate to risk their hard earned savings in the capital markets. The UTI has been playing a pivotal role with investment of over Rs.60,000 crore, mobilised from millions of the small investors through its various schemes including the US-64. The recent crash of the US-64 scheme has shaken the confidence of around two crore small investors endangering resource mobilisation efforts for developmental purposes. In this context, the party would like to suggest that immediate steps should be taken to restore confidence of the small investors and also bring the UTI within ambit of the SEBI guidelines and make its transactions more transparent and accountable. In this background, the party would like to appeal to the government for initiating immediate corrective steps including strict vigilance on functioning of the entire financial system and also empowering the SEBI on the line of Securities Exchange Commission of US.

Keeping in view the prevailing economic situation the National Executive Committee recommends the following steps:

i) Take immediate steps to improve purchasing power of the rural sector by diversifying farm produces and promoting agro-based and agro-related industries.

ii) Facilitate free movement of foodgrains through necessary amendment to the Essential Commodities Act as announced in the last Budget.

iii) In view of heavy carrying cost and lack of adequate storage capacity, the government should take steps to deplete its food stocks, which has already crossed 62 million tonnes. The government may even think of reducing issue prices to the BPL amilies in the same way as the recent reduction in issue price for the APL section. Similarly, food for work programmes should be stepped up, and export possibilities should be explored.

iv) Expedite implementation of all social welfare schemes. The government may consider social auditing of all welfare schemes with regard to transparency and efficient implementation.

v) Speed up implementation of infrastructural projects, specially the rural connectivity programme, and the National Highway Development Programme.

vi) The government should come out with a comprehensive policy package to promote small scale and village industries which should also include adequate credit support, marketing assistance, modernisation, transfer of technology, timely payment.

vii) Efforts should be made to realise maximum returns in case of disinvestment of PSUs. There could be internal valuation of the concerned PSU in addition to valuation by the global advisors.

viii) Nexus between corporate sector and UTI should be probed. Investment decisions of the UTI during the last ten years should thoroughly be investigated.

ix) Mutual funds like UTI should be barred from investing in private placement of shares at prices higher than the prevailing market prices. The Board of Trustees and the senior officials should be made accountable for any violation of investment norms.

x) All stock exchanges should be professionalised in the same way as the National Stock Exchange. SEBI should be strengthened on the lines of Securities Exchange Commission of US-inducting professionals with adequate exposure to Capital Markets.

xi) Expedite implementation of the Prime Minister's TEN POINT Science & Technology programme so as to make the country technologically strong.