New Delhi, Oct 14 (UNI) The BJP today urged Finance Minister P Chidambaram to infuse liquidity into Indian economy by allowing the banks to come out with major rights issue and stop the flight of capital from the system through Participatory Note (PN) route.
Addressing a joint press conference here, three former BJP Ministers Jaswant Singh, Yashwant Sinha and Arun Shourie, who have handled the Finance and Planning Ministries in the previous NDA government, cautioned Mr Chidambaram that nothing had happened to the fundamentals of the economies of Brazil, Argentina and yet their economies had collapsed.
''There was nothing wrong with the western economies during the last year and yet they are in deep crisis. We today have crisis of confidence and trust and not 'empty pep talk','' the three leaders said.
They asked the government to allow the banks to come out with major rights issue to infuse funds in the banks and help overcome the problem of liquidity.
Currently, the market capitalisation of the PSU banks was about 40 billion dollars. If these banks are allowed to issue rights shares, they could lend freely and would withstand competition from the international banks and may even will be able to acquire international assets at distressed price, they said.
Asking the government to do away with the Participatory Notes (PN) route, the BJP leaders said it was perilous to keep open this route when the economic situation is in the cross roads. The decision to keep the PN-route open was 'quixotic' and it also pointed towards a design and the FIIs had used this route to withdraw funds from the stock markets anonymously and there is no infusion of money from outside the shores, they pointed.
The leaders wanted the government to address the problems of FIIs and their desire for safety as well as reasonable returns by opening up Indian debt market further. Regulations should enable them to invest in government and corporate bonds as it would offer them safe asset as well as reasonable returns.
The senior BJP leaders alleged that the mismanagement of the economy had led to several major imbalances like fiscal deficit, high current account deficit, high inflation levels and a collapsing real estate sector. None of these are because of global financial crisis but a result of complecency and cavalier attitude of the UPA government which slept on wheels while the crisis was brewing.
Today, the economy is real danger of being destabilised, the leaders said.
Mr Sinha said liquidity crisis too was not because of global meltdown but it is the UPA's own creation. The tightening money supply and raising interest rates had resulted in suction of liquidity in the market, making the money dearer. ''Withdrawal of investments by the FIIs had added to the problem in a small way,'' he felt.
The leaders said the BJP was disturbed by the reports from the fields that the funds for Rural Employment Guarantee Scheme was not reaching the intended beneficiaries and the loans against the Kisan Credit Cards had just been frozen. "This may not be inadvertent and must be opened so that funds are available to the farmers", they said.
They said the speculative activity was contributing to the downslide in the stock market. The government is in slumber even to suspend the naked short selling in key scrips for a specified period, resulting in the sale of scrips without possessing them.
This kind of short selling must be outlawed and there should be transparency in the functioning of short selling, they said.
Mr Shourie said the reality was that Public Sector Oil companies were not able to find resources for their imports even from the nationalised banks and even the inter-bank lending had gone up to 22 to 23 per cent. The CRR should be reverted back to five per cent as the 150 basis point cuts announced on October 10 was 'inadequate'.
UNI MCN/KAS SG SB NS1824