Mumbai: In a strong message to a critical India Inc, Finance Minister Pranab Mukherjee Saturday said the government is "not sitting idle" and indicated that RBI may also cut interest rates on Monday to arrest slowdown.
In his first public address after being nominated as the UPA candidate for the Presidential elections, Mukherjee said government was taking steps to address concerns expressed by global agencies like Standard & Poor's and the industry.
"As Finance Minister, I cannot ignore the ground realities...I do not dismiss their concern. I take serious note of their concern and try to find out what is to be done," he said while addressing an Assocham conference here.
Indicating that RBI too will be joining the government in dealing with the slowdown, he said "I am confident that keeping in view all the factors, the RBI will adjust the monetary policy as we are adjusting the fiscal policy".
RBI is expected to cut rates in its review of monetary policy on Monday in the face of the economic growth slipping to a nine-year low of 6.5 percent during 2011-12.
Mukherjee listed growing burden of petroleum subsidy as one of the difficult areas before the Centre for which he appealed to the States to reduce their taxes.
As far as state finances in 2011-12 were concerned, he said, they were quite satisfactory. He has written to the States that Centre will also respond but it has to be balanced because "if the federal finance becomes weak, nobody will be able to bailout Indian economy."
On Eurozone crisis, Mukherjee said, India is as concerned as others whether Greece will remain part of the currency union, as the developments are also impacting value of rupee. Rupee has lost against dollar by about 20 percent in the last one year.
Industry leaders like Azim Premji and N R Narayana Murthy have blamed the government of policy paralysis.
Mukherjee said the government is working on managing its finances and reducing subsidies, and listed slow growth, high fiscal and current account deficits, inflation and negative sentiments as challenges facing the economy.
"We shall have to reduce our subsidy... What I projected that it must be below 2 percent of GDP, we cannot afford to have it. We shall have to improve delivery mechanism for reaching subsidy to targeted beneficiaries. And we are taking steps...We are not sitting idle," he said.
The government targets to bring down the subsidy bill to below 2 percent of GDP in the current fiscal and 1.75 percent in the subsequent years.
The government has budgeted major subsidies including food, fuel and fertiliser at Rs 1.79 lakh crore for 2012-13, lower than the Rs 2.08 lakh crore in the last fiscal.
Pointing out that the country is in a difficult economic situation and uncertainties over euro-zone crisis, Mukherjee said, "...The devaluation of Rupee, which is closely linked with the euro-zone crisis, is a matter of concern".
Stating that the country can benefit from the lowering of crude oil prices, Mukherjee said: "We can reduce our import bills to some extent". Crude oil prices have softened to USD 90 a barrel, from over USD 120 a barrel earlier this year.
In order to provide relief to customers, Mukherjee said he has written to Chief Ministers to consider temporarily lowering of duties on petroleum products.
"I have suggested to them (state CMs) if you agree to reduce the tax burden temporarily, say till crude prices come to USD 90, Union government is ready to reduce. I have written to Chief Ministers. It will provide relief to consumers.
"When situation is difficult, burden has to be shared by all stakeholders, it should not be passed on to only one stakeholder," he said.
The oil marketing companies had hiked petrol prices by Rs 7.50 a litre in May. Later in June it had rolled back the price hike by Rs 2 a litre.
First Published: Saturday, June 16, 2012, 14:32