| Economic reforms the next stimulus: Pranab | |
| BS Reporters / New Delhi May 28, 2009, 0:23 IST | |
Putting forward the broad economic agenda for the next five years, Finance Minister Pranab Mukherjee said the next round of stimulus for growth would be in the form of economic reforms, and the government has already identified the plan of action.
“Sustained stimulus to growth can be harnessed by the next round of economic reforms. We have a broad plan of action in mind,” Mukherjee told reporters in his first press conference after taking charge as finance minister on Monday. “We need to seize the opportunity presented by the current circumstances to push long-pending reform measures,” he added.
He declined to spell out details of the package but said the government would come out with short- and medium-term vision statements for India’s economic growth, after consultations with various stakeholders.
With the Congress-led alliance securing a majority in the recent general elections, analysts are hoping that the government will push less forward reforms agenda in key sectors like banking, finance and insurance.
Government to borrow more
Meanwhile, with economic growth expected to slow to around 6 per cent in fiscal 2010 from an estimated 7.1 per cent the previous year, Mukherjee said the government would increase its spending to restore growth and employment through additional borrowing.
"We are committed to restoring growth and employment and that would not have been possible without increased spending funded by incremental borrowing. This would need to be continued in 2009-10,” he said.
The borrowing calendar released by the government shows that the central government is scheduled to borrow Rs 3,62,000 crore in 2009-10 to meet the fiscal deficit gap of 5.5 per cent of Gross Domestic Product.
The Centre has already borrowed Rs 6,000 crore more in the last two weeks than what was planned in the borrowing calendar. Even as government is planning to borrow more in the current fiscal, Mukherjee said, “We are equally committed to the process of fiscal consolidation over a period of, say, two to three years.”
Under the Fiscal Responsibility and Budget Management Act (FRBM), the government should have reduced its fiscal deficit to 3 per cent of GDP by 2008-09, but the interim budget estimated the gap at 6 per cent of India’s output growth. The applicability of the FRBM Act has been kept in abeyance for some time as the government cut taxes and increased spending to counter the global economic crisis.
“Prophets of doom have been unduly focusing on increased public spending and the consequent increase in the revenue and fiscal deficits in the recent past. We are hopeful that an early return to our recent growth performance will help us come back to our preferred path of fiscal prudence,” he said.
Common man schemes to be strengthened
Even as the new government will pursue economic reforms to boost growth, Mukherjee said the full budget for 2009-10 would focus on strengthening various schemes aimed at benefitting the common man.
“Broadly, the election results have vindicated the strategy of inclusive growth, so the aam aadmi
will remain the focus of the proposals, as in the past,” he said.
The Congress-led UPA implemented rural employment guarantee scheme in all districts that promised 100 days of employment at a specified minimum wage. In addition, the previous government waived farm loans to the tune of Rs 60,000 crore.
Without specifying the nature of the schemes, Mukherjee said, “We will strengthen the various “inclusive” elements in the coming budget.”
The Congress party in its election manifesto has promised to extend the employment guarantee scheme to all urban areas and increase allocation of subsidised rice/wheat under the public distribution system (PDS). It is not clear whether the government will decide to implement this in the current year itself or not.
Government to push for doing away with budget scrutiny
The government will request political parties represented in the Parliament not to undertake the scrutiny of the budget proposals by the Parliamentary Standing Committees, so that the budget process is completed by July 31.
“As soon as Parliament begins, I will talk to all leaders of political parties and if they agree to dispense with the scrutiny by standing committees, that would help me complete the entire exercise by 31 July,” Mukherjee said.
The budget is scheduled to be presented in the first week of July.
Under current norms, after the general budget is presented in the Parliament, it is discussed in two stages. In the first phase, “broad outlines of the Budget and the principles and policies underlying it,” are discussed.
After this, the Parliament goes into a brief recess, where Demands of Grants of various departments are discussed by various standing committees comprising parliamentarians, who are required to present their reports within a stipulated period of time. After this process, the Appropriation Bill and The Finance Bill are introduced passed.
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