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As the government looks at ways to revive sagging growth, Finance Minister Arun Jaitley on Friday said maintaining fiscal prudence is a "challenge", but maintained that there is no need to "panic".
"How do you maintain the balancing act between continuing to spend in an economy, continuing to support your banks and at the same time maintain the best standards of fiscal prudence? I think the last part is the current challenge that we are facing," he said.
Speaking at the Bloomberg India Economic Forum here, Jaitley reiterated that the government is looking at measures to boost the economy but refused to answer a specific question on whether it will be a "stimulus" or not.
There is an increased speculation over a possible fiscal stimulus which can go above Rs 40,000 crore after six successive quarters of dip in the economic growth, which slid to 3-year low of 5.7 per cent in the April-June quarter.
However, increasing public spending comes with the threat of stoking inflation and breaching the fiscal deficit commitments, something which the rating agencies are not very comfortable with.
Stating that the world must be "rest assured" about India, Jaitley said the answer to the challenge lies in balancing the conflicting aspects.
"We are all conscious of the fact that there are a value and an importance of the kind of prudence that is required in an economy, we are a responsible economy.
"At the same time, we also are conscious in such situations of spending. Obviously, the real answer lies in finding the balance between the two. The balance lies in finding the resources to do the same," he said.
"I don't think there is a need for panic. There's a need for analysis and for responsive action to this and we are fully prepared for this," he added.
Under the revised fiscal responsibility roadmap, the government is committed to getting the fiscal deficit to 3.2 per cent in 2017-18 but reserves the right to push it by 0.5 per cent in case of demanding circumstances.
Niti Aayog chief executive Amitabh Kant, who was also at the event, said the states need to be very astute in their financial management.
Kant also suggested looking at the quality of fiscal deficit and focusing on pushing exports, bank recapitalisation and projects at the last stage of completion.