Stimulus to stay; may cut oil, fert subsidies: FM

The government today said it is looking at steps to cut subsidy on fertiliser and oil sale with an aim to cutting non-Plan expenditure and contain fiscal deficit.

Addressing the economic editors' conference, Finance Minister Pranab Mukherjee said that the fiscal deficit would be rolled back to 5.5 per cent in the next financial year from 6.8 per cent in 2009-10. However, he said stimulus packages given to industry last year would continue.

He said a few more PSUs have been identified for disinvestment after the overwhelming response to NHPC and Oil India IPOs. Market capitalisation of both these companies increased significantly after the public offer.

 

Concerned over decline in non-farm credit off take, Mukherjee said banks have been asked to correct the situation.

"All out effort is being made to ensure that credit off- take to the employment generating sectors, especially agriculture and micro and small enterprises picks up," the Finance Minister said.

Underscoring the need for fiscal consolidation, he said the government is "looking quite closely at steps to help curtail non-plan expenditure, especially subsidies on fertilizer and petroleum products".

Pinning hopes on tax reforms for boost in revenue, Mukherjee said the introduction of Goods and Services Tax (GST) in 2010-11 "is on track."

The proposed indirect tax structure, GST, scheduled to be introduced in April 2010, will do way with most of the indirect taxes like excise and service taxes at the Center and also state level taxes like VAT and octroi.

Allaying concerns on the implication of large government borrowings, the Finance Minister said the RBI has taken several steps to improve liquidity in the market.

"There is no dearth of liquidity in the economy," he said, adding, inflation is not a pressing concern as yet.

He said though the impact of some normal south-west monsoon is yet to be felt, the agricultural economy may fare better than the initial estimates of decline in food production.

As per the advance estimates released in July, kharif production this year was expected to be 2.69 per cent lower than last year.