No haste but take su

No haste, but take sure steps
to  reach liberalism

There is no need to jump over the fence to bring in a quickie liberalism. That will only flop. But take cock-sure steps to herald  full liberalism as soon as the economy can hold it.

India is no banana republic where there can be all sorts of experiments, some of which may boomerang on the people.

I am referring to the Tarapore Committee report on fuller capital account convertibility.

Some enthusiasts are worried that the committee was reticent on bringing in fuller rupee convertibility at one go.

But economy watchers should agree with the committee’s recommendations under which full convertibility can be achieved by 2011. Mind you, that is way ahead of the deadline put by World Trade Organisation for zero duty on imports to be achieved in 2014.

Putting two and two together, it can be surmised that many of the Tarapore committee’s suggestions are cogent.

There can be to and fro transfer of money way ahead of the 2011 deadline for fuller capital account convertibility.

Outward remittances by individuals would have a ceiling of $ 50,000 a year by March 2007, $ one lakh by 2008-2009 and $ two lakh by 2010-2011.

NRIs can buy foreign shares. In addition, mutual funds can invest abroad up to $ 3 billion this year. This would be capped at $ 5 billion by 2011.

However, there is a dampener. The NRIs cannot directly invest in companies listed on foreign stock exchanges.

This might be altered when the review committee evaluates the situation at every milestone proposed by the Tarapore Committee.

There is a roadmap for the economic liberalisation being carried out, culminating in  free market economy by 2011. Everything is being done in a graded manner.

The first phase reforms are meant for 2006-2007. The second phase will start in 2007-2008 and end in 2008-2009. The final phase will take off in 2009-2010. The measures would square off in 2011.

Foreign Institutional Investors have to funnel funds in a more transparent manner. The concept of participatory notes, which does not require revelation of the indentity of the foreign investor, is being wiped out. The FIIs may not like it, but funding would be in an open manner.

They can invest in Indian stock markets. But it should be through SEBI-registered entities. The investments should be through bank accounts in India. This would take care of the stock market foul plays by unidentifiable foreign investors.

By the time we go in for total convertibility, the economy should be so potent to take care of the poor and the marginalised. There should be workable social security schemes for the unemployed as well as the unemployable.

No section of the people should feel that they are ignored. At the same time, it has to be taken for granted that there would be no going back. Open economies offer unbelievable scope for growth, if we look at it perceptively.

The spurt in prices of natural rubber, cash crops, export-oriented items has resulted in only because of the globalised market. The growers get comfortable prices only because of the open economies. When there is short-fall in wheat stock, it has been allowed to be imported duty-free. This is the way it should be done.