The government’s disinvestment policy must be realistic and based on a clear guideline, chief economic adviser Arvind Subramanian told Hindustan Times on Saturday. Pitching for expanded public spending despite fiscal constraints to boost economic growth in 2016-17, Subramanian said private investment was not likely to pick up “very soon” in the wake of the mounting challenge arising from the “twin balance sheet problems” of the impaired financial positions of public sector banks and a few corporate houses.
“This year’s target will be realistic and disinvestment policy must be framed based on a clear guideline… the new secretary is working on this,” Subramanian said in an interview a day after presenting an extensive Economic Survey, which projected an economic growth rate of 7 to 7.75% for 2016-17. The government set an ambitious target of Rs 69,500 crore from disinvestment and strategic sale in state-owned companies for 2016-16 but has been able to raise only Rs 18,344 crore.
Subramanian explained that the idea behind maintaining a wide range for the projected growth rate was driven by uncertainty of the monsoon and a fragile world environment besides the issue of nominal and real GDP.
He added that the implementation of the much awaited goods and services tax bill (GST) was unlikely to have any “immediate impact” on the country’s growth rate. “We are all hoping that GST comes through.Given that it does, it will not have an immediate impact on the short-term forecast... it will take some time to show results,” he said.
Subramanian underlined the need to undertake reforms that do not require Parliament approval.
“The bright spot continues and with the political mandate that the government enjoys, it can bring through reforms, which are low-hanging fruits and do not require the Parliament nod. For example, the government must look at the 4Rs to address the problems faced by the banks (the Economic Survey prescribed 4Rs: recognition, recapitalisation, resolution and reform).”
The chief economic adviser said all options, including setting up of a bad bank, must be kept open to address the issue. “To address the problems in the banking sector, this is critical and the 4Rs must be tried but in case it doesn’t work, all options must be looked at and setting up a bad bank is definitely one option.”