New Delhi: Finance Minister Pranab Mukherjee
on Wednesday said it is premature to "exit" the fiscal stimulus as
the global economy is not showing robust recovery, but was
optimistic about economic growth.
Ahead of the monetary policy review on October 27 by
Reserve Bank, he plans to hold consultations with the apex
bank and would not like to comment on issues like where
interest rates are headed.
"I would like to watch the situation for some more time,"
he told agency when asked whether fiscal concessions given to the
industry to overcome the global financial crisis that started
last year would be withdrawn on inflationary concerns.
He said till now the global economic recovery "is not as
robust as we expected it to be". Unless this recovery takes
place, the government would not think of an exit policy for
the stimulus, he said.
The Prime Minister's Economic Advisory Council has
projected better growth, an outlook that beats estimates of
the government and RBI. It expects the economy to expand by up
to 6.75 per cent this fiscal, while pegging inflation at near
six per cent by March 2010.
"There has been more or less the broad outline that he
(PMEAC Chairman C Rangarajan) has indicated in the economic
outlook for 2009 -10. We are also predicting like that," he
said.
On the inflation expectations and the possibility of the
interest rates going up, the Finance Minister said he would
meet Reserve Bank D Subbarao before the credit policy review.
"We will have the opportunity of discussing with the RBI
Governor... I think before (the review) I will have some
discussions," Mukherjee said.
Asked if there would be spike in interest rate by RBI in
the light of rising inflation, he said, "We are working in
close cooperation (and) the monetary policy and fiscal policy
are moving hand-in-hand. Therefore, whatever corrective
measures are required at whatever point of time will be
taken."
On exports, he said if there is no robust recovery in
Europe and North America there cannot be any substantial
growth in India's exports. Nearly 62 per cent of exports are
directed towards Europe and North American markets, he said.
"In my Budget I have given some money to Ministry of
Commerce for exploring new markets which would take time," he
added.
Commenting on the global economic scenario, he said his
position was the same as what he had taken in the meeting of
Finance Ministers of G-20.
"We took that (decision on stimulus). We took some risks,
there is no doubt in it. Unless the world economy firmly
recovers, signals are strong, perhaps it would be premature to
think of exit policy. Therefore, I would like to watch the
situation for some more time," Mukherjee said.
"We took some risks, there is no doubt in it. When I
presented the budget, the inflationary pressure began to move
upwards but still it was under control," he said, adding that
though wholesale price-based inflation was negative, retail
prices were moving up.
The PMEAC report said inflation, which is hovering around
one per cent, may firm up to 6 per cent by the end of the
current fiscal.
"Inflation also he (Rangarajan) has projected it would be
around six per cent by March and I am also saying that it
would be more than five per cent," Mukherjee said.
He, however, expressed concern over the prospects of
agriculture output in view of natural calamities. "The country
could have achieved high (farm) growth, but adverse impact of
both drought and floods in some parts have affected the
prospects, particularly the kharif crop," he said.
In this context, he cited the example of Andhra Pradesh,
a major supplier of rice, and said the southern state had
escaped drought but paddy crops there were substantially
damaged by last month's floods.
The situation was more or less the same in Bihar and
Uttar Pradesh, which were affected severely by drought, he
said.
"The sagacity of chief ministers in Haryana and Punjab in
buying power at a higher rate to draw ground water saved the
crops," Mukherjee said.
However, Mukherjee apprehended that the food grain
production shortfall could be higher than the 10-12 million
tonnes anticipated earlier.
Last year, the production was very high - 99 million
tonnes - putting both winter and summer rice crops together.
Though he admitted that inflationary pressures would
remain as the year winds to a close, he said there would be no
shortage of food grain supply.
Bureau Report
First Published: Wednesday, October 21, 2009, 15:55