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Monday, Jan 26, 2004

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Borrowing cost

This is with reference to "Cost of borrowing will come down" (Business Line, January 23).

It is good to see that the Chief Economic Advisor to the Finance Ministry, Dr Ashok Lahiri, feels that the cost of borrowing will come down due to the upgrade of India's long-term foreign currency rating by Moody's and Fitch.

However, the economy may also be exposed to a large reduction in the flow of international capital. Thus, fiscal tightening must be practised effectively, particularly through management of government expenditure.

If Government expenditure is to be significantly financed by output/services taxes, the growth rate of economic activities will be lower in the in the medium- and long-term.

Tapas Kumar Chakrabarty

Mumbai

Letters to the editor and contributions can be sent by e-mail to: bleditor@thehindu.co.in

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