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Kaushik Basu clarifies on economic reforms statement


April 20, 2012 - Washington

Following the controversy around the statement made at the Carnegie Endowment for International Peace on economic reforms in the country, Chief Economic Advisor, Ministry of Finance, Dr. Kaushik Basu on Friday clarified that the central message of his talk was the possible European crisis in 2014 and not India's 2014 general elections.

In a statement issued by the Ministry of Finance, Basu said: "Some of this has been reported poorly, juxtaposing my comments on Europe in 2014 with the Indian election of 2014. This is unfortunate because the central message of my talk was the possible European crisis of 2014 and India's major rise thereafter, likely overtaking China."

Clarifying further Basu said the gist of his argument was that 2014 was an important year as numerous European banks would begin to repay 1.3 trillion dollars worth of loans, which they had received from the European Central Bank.

"The gist of my argument was that 2014 was an important year because numerous European banks would have to begin to repay 1.3 trillion dollars worth of loans that they had received from the European Central Bank. This could precipitate a major global economic crisis-a third round of crisis after 2008 and 2011," said Basu.

Basu added that due to coalition democracy there was some slowdown in economic reforms and decision-making adding that a single party majority government would not have faced this problem.

"I mentioned also that thanks to coalitional democracy, there is some slowdown in economic reforms and decision-making. I specifically mentioned that the problem with the GST reform was that the opposition realized this is a good reform. Therefore, it was reluctant to let it happen under the current regime. A single-party majority government would not face this problem. If there is a single-party majority in the next election, that will facilitate such reforms," he added.

Basu was caught in the eye of a political storm after he stated at an event in Washington that reforms in India were unlikely before 2014 elections.

The statement had received severe flak from opposition parties accusing the UPA II government of suffering through 'policy paralysis'.

ANI

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