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Tuesday, October 16, 2001

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Economy will be insulated from global impact: Sinha

By Our Special Correspondent

NEW DELHI, OCT. 15. Steps will be taken to insulate the economy from the global impact of the terrorist attacks in the U.S. and the subsequent conflict in Afghanistan, the Finance Minister, Mr. Yashwant Sinha, said here today.

Referring to the slowdown in the growth of exports, Mr. Sinha said the Government would continue to watch the situation and take necessary steps to spur investment and growth. And initiatives would be stepped up in the infrastructure sector to increase demand, which would enable the country to sell in the international market.

The war had impacted the stock markets, the rupee, tourism, aviation, foreign investment inflows and exports, he said on the sidelines of an insurance conference organised by the Federation of Indian Chambers of Commerce and Industry (FICCI). But the dimension of the impact on the economy was yet to be assessed.

Mr. Sinha expressed concern over the sluggish 1.8 per cent growth in production in August, compared to 5 per cent in August 2000. He was, however, more confident of keeping inflation under control as prices had been rising at a ``reasonable'' 3.4 per cent.

On bank rate cuts by the Reserve Bank of India in February-March, he said the cut was one of the factors driving the economy but it did not have much of an impact. Interest rates were the lowest ever for a decade but more had to be done in this direction.

Earlier, inaugurating the conference, Mr. Sinha said private sector performance would be the basis for taking any decision on raising the foreign equity limit beyond the existing level of 26 per cent. Since the insurance sector had just been opened up, it was incumbent on the foreign partners to show results. Only then could a case be built for raising the equity level in the sector.

Despite a predominant role being played by the public sector, there was still room for wider coverage, both territorially and product-wise, for the private sector. Dispelling doubts over rural India's business viability, the Minister urged the private players to look more closely.

Mr. Sinha was not in favour of any amnesty scheme or lowering of tax rates to shore up revenue collections as the industry had not adequately responded to earlier sops. There was no guarantee that a reduction in tax rates would lead to price cuts and that the tax collection would be higher.

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