India can`t handle high fiscal deficit for long: Pranab

Last Updated: Monday, November 9, 2009 - 14:37

London: Finance Minister Pranab Mukherjee has
said that India will not be able to sustain high fiscal
deficit in the long run, but he did not give any timeframe for
withdrawing the stimulus measures that inflated the deficit.

As Prime Minister Manmohan Singh shared with industry
leaders in New Delhi on Sunday, his government`s intent to
wind down stimulus measures next year, Mukherjee told
reporters in St.Andrews, Scotland, that he had already told
Parliament high fiscal deficit was not sustainable in the long
run.

India`s fiscal deficit is projected to be 6.8 percent of
GDP this fiscal, consequent to duty sops given last year to
the industry to insulate it from the effects of the global
economic crisis.

Mukherjee said efforts would be made to reduce fiscal
deficit to four percent of the GDP and revenue deficit to 1.5
percent by 2012.

Echoing the sentiments expressed by the Prime Minister,
he said that the economy would grow by more than seven per
cent next fiscal. "In the next year, we will have growth
projection of more than seven per cent," he told reporters
yesterday evening after a G-20 Finance Ministers meeting.

With regard to the current fiscal, he said the country
was likely to register an economic expansion of 6.5 percent,
less than the 6.7 percent recorded in 2008-09.

With the government providing stimulus packages to help
the economy combat the impact of the global crisis, the fiscal
deficit is estimated to soar to 6.8 percent of the GDP during
2009-10.

Replying to questions on the impact of the monsoon on the
economic growth and prices, Mukherjee said the country had
enough buffer stock of wheat and rice and was also importing
essential items to supplement domestic supply.

"On the whole, the food scenario appears to be bright,"
he said.

Although the overall inflation, based on movement in
wholesale prices, has been hovering around 1 per cent, the
recent data released by the government revealed that food
inflation has shot up to more than 13 percent.

Referring to the purchase of 200 tonnes of gold by the
RBI from the IMF, Mukherjee said India has a forex reserve of
USD 285 billion and "we have spent USD 6.5 billion to buy the
precious metal."

"In 1991, we pledged our gold, now the situation is
reversed," he said, pointing out that the purchase of gold
will not have any impact on the rupee value.

Replying queries on British Prime Minister Gordon Brown`s
proposal at G-20 meeting for Tobin tax on financial
transactions, he said, "We have yet to get full details of the
proposal."

Earlier, Brown had called on the G20 to consider a tax on
financial transactions to make banks more accountable to
society.

As regards the issues of climate change, Mukherjee said
they would be discussed at the Copenhagen summit in detail and
stressed that developing countries will have to contribute to
the efforts, which may need about USD 80 billion by 2030.

On the Cabinet`s recent decisions on disinvestment, he
said the timing for offloading of government stake in PSUs
would depend on market conditions.

The Cabinet has recently decided that all profitable
listed PSUs will have to offload at least 10 percent
government equity to public and the unlisted profitable
state-run firms will have to come up with public offers.

Bureau Report



First Published: Monday, November 9, 2009 - 14:37

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