New Delhi: India has cautioned against
immediate withdrawal of stimulus packages by the governments
as it may lead to "collapse" of the world economy.
"Immediately coming out of the stimulus package ... exit policy may not be the correct approach because in that case if the world economy collapses the depression would be deeper," Finance Minister Pranab Mukherjee said today at a Corporation Bank function while recalling his interactions with Japanese Prime Minister Yukio Hatoyama yesterday.
Later, when asked if he was hinting at gradual withdrawal of stimulus packages, Mukherjee said, "I am not hinting at anything. What I told (Japanese Prime Minister) was that we shall have to strike a balance between the requirement of the economy and the capacity of the economy to bear this level of fiscal deficit and borrowing."
The Finance Minister said that he has told Japanese Prime Minister that countries have spent huge amount of money in stimulus packages to help the economies which has resulted in high fiscal deficit in almost every country and also greater borrowing which have propensity to leave little resources to the private sector.
On the Indian economy, he said that stimulus packages are
projected to widen the fiscal deficit to 6.8 of GDP this
fiscal. He reiterated that this kind of fiscal deficit cannot
be sustained for a longer period.
The Finance Minister said he has target for fiscal deficit for the year 2010-11 and year 2011-12.
The government intends to bring down fiscal deficit to four per cent by 2011-12 even though it is projected to widen to an 18-year high in the current fiscal.
In his Budget speech this year the Finance Minister had said, "I intend to... return to the FRBM target for fiscal deficit at the earliest and as soon as the negative effects of the global crisis on the Indian economy have been overcome."
Mukherjee said huge amount of borrowing could leave little resources for the private sector in the markets and they may not get adequate credit.
The government is scheduled to borrow Rs 4.51 lakh crore from the markets, most of which has been raised so far.
"Fortunately, we have been able to manage in cooperation with Reserve Bank of India and with the cooperation of all stakeholders to ensure that government's borrowing does not elbow out the private sector from the credit market," Mukherjee said.
Meanwhile, the Finance Minister gave away awards to 21 outstanding Micro, Small and Medium Enterprises. The Corp Excel award instituted by the Corporation Bank for categories.
PTI
First Published: Wednesday, December 30, 2009, 20:54