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Last Updated: Friday, 28 May, 2004, 10:42 GMT 11:42 UK
India finance boss defends policy
Palaniappan Chidambaram
Chidambaram says his policies will make people more prosperous
India's finance minister has defended the new government's economic blueprint following a lukewarm media response and stock market jitters.

Palaniappan Chidambaram stressed that economic reforms would continue and a growth rate of 7%-8% a year would be targeted.

But his words failed to stop a 4% slide on Bombay's Sensex index.

The new Congress-led government announced its left-leaning "common minimum programme" on Thursday.

Foreign investment

Since the election result earlier this month, markets have been fearful of a slowdown in the privatisation of state firms and a possible ballooning of the federal deficit because of increased funding to the rural poor.

Once the growth rate kicks in, everything will fall into place
Palaniappan Chidambaram

The common minimum programme, announced on Thursday, did include the scrapping of key elements of the former government's privatisation programme.

The new 20-party ruling alliance under Prime Minister Manmohan Singh said it would not privatise profit-making state-owned firms or publicly-owned banks

On Friday Mr Chidambaram said other economic reforms would continue.

"The premise on which the common minimum programme is based is that we will do everything possible to keep the economy on the growth path of 7%-8% - more if we can," he said.

"Once the growth rate kicks in, everything will fall into place."

Mr Chidambaram said increasing foreign investment was also a key issue. India could absorb up to $15bn a year, he said.

If [the common minimum programme] is implemented faithfully, efficiently, effectively over the next five years, our credibility as reformers will be enhanced, not weakened; the economy will be stronger, not weaker; people will be more prosperous," he said.

'Heaven on earth'

Traders were not convinced, and in Friday trading shares fell 4.16% on the Bombay Stock Exchange.

Bombay Stock Exchange
Traders in Bombay were not convinced and stocks fell on Friday

"Investors are in exit mode," said Anish Marfatia, assistant vice president at Asit C Mehta Investments.

Some of India's newspapers also gave the programme a cool reception.

The Indian Express headline was "Very Common and Very Minimum".

It said the policies promised "heaven on earth".

"We need to know what the promises mean for the government's fiscal bottom line," its editorial said.

"Show me the money," echoed the Business Standard newspaper.

Mr Chidambaram tried to answer the concerns by stressing the government was committed to widening the taxation net.

He also said that the state firms which would not now be privatised would still be given "full managerial and commercial autonomy".

Many analysts still fear that the commitment to increased rural spending will make it much harder for Mr Chidambaram to control a central government deficit that stands at about 5% of gross domestic product.

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