level, in respect of those enterprises which are purely in a commercial but competitive environment, the process of expansion, strengthening or disinvestment are essentially operational matters and hence best carried out by professionals with due regard to dynamics of the market and securities regulation. this should ensure that the total investment portfolio of the commercial enterprises of the government is managed efficiently reconciling commercial objectives and sound fiscal management. this in brief is the logic behind the proposed pmci. bypass and delivery of services the importance of fiscal adjustment at state level in enhancing the output and quality of services has been recognised. the popular perception of effect of reform and thus confidence in the economy appears to have been undermined by the deterioration in the quality of public services be it education or health or even drinking water. while a generation ago, most of these facilities were sought and provided in the government sector, today, a large part of some of these facilities is available only on commercial basis. consequently, many, especially the poor are deprived of reasonable or in any case equitable access to these services. in fact, even security of buildings is getting increasingly privatised in urban areas. in other words, there is a phenomenon of “ bypass " of these public services since the main arteries appear choked, on which enormous sums are spent by government. there is sometimes a tendency to spend energies in regulating the bypass activities for ostensible public purpose than on improving the quality of services in public domain. while superfluous regulatory aspects would be considered by the proposed zra, there is a need for assessing, on a continuous basis, the cost of inputs and the quantity as well as quality of output in regard to delivery of these public services. perhaps, it is possible to devise mechanisms under the aegis of the comptroller and auditor general to make such assessments on a continuing and scientific basis, by outsourcing as is being done in respect of commercial audit of public enterprises. indeed, the audit of delivery of such public services deserve far greater energies and attention than many other sectors. it is hoped that media and academia would join in such efforts to assess these sectors, which are critical to the nation ’ s well being. overhang issues it is necessary to make a distinction between what may be termed as “ flow ” issues and overhang issues. there is merit in insulating the overhang problem from flow issues and demonstrably solve the flow problem upfront. for example, in regard to food stocks there is addition to buffer

by keeping an option for premature closure. furthermore, we had to ensure that the borrowing had an appropriate medium - term maturity, say five years. ribs, which are essentially in the nature of foreign currency deposits on a par with fcnr - b, were devised in the light of these considerations. it was also necessary for the rbi to ensure that these funds did not disrupt the money, forex or government securities market. there have been three main points of criticism regarding ribs, i. e. cost of raising ribs, substitution of fcnr - b deposits and exchange rate guarantee. a total amount of $ 4. 23 billion has been mobilised at a moderate cost in the face of a difficult international environment and the recent downgrading of our credit rating. some have called it the deal of the year. to quote an international investor, “ … the cost at which funds have been raised imply a perceived sovereign rating three to four notches higher than current levels. for comparison sake china ’ s 2003 yankee bond issue, rated a3 by moody ’ s trades at a spread of 280 basis points ( on august 21 ) over the ten year us treasury implying a dollar yield of 7. 90 per cent and the rib issue is not even sovereign risk. ” on the second point, as most of the banks that have actively mobilised ribs may be aware by now, there has been limited substitution from fcnr - b deposits and moreover, to the extent there has been substitution, it would result in elongation of the maturity of deposits to five years, while at the same time bringing into the country actual foreign exchange that is presently kept unswapped. in regard to the exchange guarantee extended, it is recognised that under normal circumstances, issuance of such a guarantee is inadvisable. however, it can be legitimately held that the recent times have been far from normal. in return for a specific guarantee on ribs, the government can claim benefits in four ways, viz. addition to forex reserves, support to macroeconomic environment and sentiment, indirect support for its own borrowing programme and resources for infrastructure development, including for public sector entities. it can also be argued that the government bears exchange risk in regard to bilateral and multilateral flows for its use or for onlending. moreover, given the indian track record on prudent macroeconomic management, the burden of the exchange guarantee could be said to be manageable. prospects the trend growth rate of real gdp in india during the