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| FM seeks balance between growth and fiscal deficit |
| Saubhadro Chatterji / New Delhi May 27, 2009, 00:08 IST |
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Finance Minister Pranab Mukherjee said here today that he would like to strike a balance between the imperatives for achieving higher growth and ensuring prudent fiscal management.
“We require growth and for that we require money. If all government resources are not adequate, you have to borrow. Naturally, the fiscal deficit would increase. Therefore, we have to strike a balance between these two competing requirements — of growth and prudent fiscal management. And it will be my effort to strike this balance,” Mukherjee said in an exclusive interview with Business Standard.
Dwelling on a wide range of economic policy issues, just about six weeks before he presents the regular Budget for 2009-10, Mukherjee said he was yet to complete the analysis of the impact of the series of fiscal stimulus packages that were announced in December 2008, January 2009 and finally in his Interim Budget a month later. A considered view on the need for fresh fiscal stimulii will be taken only after assessing the impact of those measures on the economy.
Mukherjee added that all steps needed to restore the Indian economy to a higher growth trajectory would be taken. He admitted that global developments had slowed the Indian economy and their adverse impact was still visible, with the likelihood of the last financial year clocking a growth rate of 6.5 to 7 per cent, against an average annual growth rate of 8.9 per cent in the previous four years.
The finance minister, who will present his fourth regular budget in his long political career (he had presented three budgets from 1982-83 to 1984-85 as finance minister in the Indira Gandhi government), declined to answer any budget-related questions, but offered a laconic reply, "All I will say is wait", when asked if he would like to move ahead with reforms in insurance, banking and pensions.
Mukherjee admitted that the role of the public sector was important and the inherent strength of the state-owned banks and insurance companies had helped the Indian economy weather the adverse impact of the global financial sector turmoil. Endorsing the public-private partnership model for developing infrastructure projects, he said this was the "most important mechanism" to achieve targets in the infrastructure sector. On the question of the government's policy on special economic zones, which enjoy several tax concessions, Mukherjee said those schemes had brought substantial benefits specially for exports but a few areas in these schemes could be rectified.
Asked if he was in favour of extending the national rural employment guarantee scheme (NREGS) to cover the urban poor, Mukherjee said there was no doubt that this scheme had helped create jobs for poor people in villages. He was open to examining ways to modify such schemes to ensure that the poor unemployed people in urban areas also got some benefit.
Mukherjee gave a clear hint that his budget would also address the needs of the aam aadmi by expanding employment generation schemes and social security nets.
Asked what he meant by quoting Nobel laureate Amartya Sen in his interim budget speech on the need for growth with equity and a commitment towards security in a downturn, Mukherjee said, "All this will be spelt out in my budget."
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