I am very pleased to welcome all of you to the second meeting of the Economic Advisory Council. We had last met in October 1998 when it was decided that policy papers will be prepared by the concerned Ministries and other organizations on the following five identified themes,

These papers have since been circulated to all of you and can be considered further.

At today's meeting of the Council, I solicit your views on some issues that are of immediate relevance to us.

FIRST, as you are all aware, the Finance Ministry is preparing the Budget for the new fiscal year. I felt that it would be useful for Government to have your views on budget-related issues so that they could be given due consideration well before the Budget exercise is completed.

SECOND, I cannot conceal my concern on the state of finances of the Union and the States as well. Fiscal discipline is at the Centre of any strategy for maintaining macro-economic stability. What are the tangible steps that can be taken in this direction and on which a national consensus can be built? We also need to evolve a mechanism for imposing greater discipline on the use of resources both by the Centre and the States and to prevent diversion of funds to optimize returns on investments.

THIRD, the Government took some important and difficult decisions recently about subsidies. Containing expenditure on subsidies is crucial for sound fiscal management. At the same time, we need to ensure that the poorer segments of our society are not adversely affected and, while working out transitional arrangements, suitable Social Safety Nets are in place. We need to achieve a broader national consensus on our approach to subsidies, both implicit and explicit, and I solicit your views on how we should deal with this issue.

FOURTH, while our external reserves have risen over the recent months and the exchange rate has been stable, we need to carefully monitor our medium-term strategy for continued satisfactory management of the balance of payments. Exports, even while becoming positive in the last two months, continues to be sluggish and the trade gap as well as current account deficit for the fiscal year need to be kept under constant review. We also need to consider steps that are necessary to ensure that the external side of our economy remains healthy.

FIFTH, the Government have taken some important initiatives recently in regard to infrastructure like roads, airports, ports, telecommunications, and the hydrocarbon sector. We have also initiated a number of steps like the constitution of a Cabinet Committee on Disinvestment and restructuring of the working of the Core Group of Secretaries for restructuring Public Sector Enterprises and accelerate our Disinvestment program. Your suggestions both in regard to these initiatives and in other areas that require a fresh look would be useful.

SIXTH, poverty alleviation will remain at the centre of our economic planning. Our efforts in the past to create productive employment and self-employment opportunities on a massive scale have been inadequate. Similarly, investments designed for social sector development - particularly, areas like education, drinking water, low-cost shelter, sanitation and sewerage, and primary health care have been grossly inadequate. We need to both allocate additional resources and improve the efficiency of existing programs significantly in the critical areas. This requires careful balancing of expenditure policies - sustaining fiscal rectitude with higher expenditure outlays, improving the efficiency of expenditure and re-prioritization of overall expenditure outlays.

FINALLY, but not the least, are issues which are of global concern. We have made some suggestions for the reform of the Global Financial Architecture. This issue will figure prominently at the forthcoming meeting of the G-15 that I would be attending next week. It is also connected with the on-going debate in the WTO for the next round of negotiations. Your views on the key elements for the reform of the Global Financial System and the contribution that India should make in fostering a wide-ranging consensus-building process would provide important inputs in our thinking process.

The points that I have raised cover a wide spectrum and I hope the time would permit us to receive your considered suggestions and comments on these issues that are of much concern to us.