The Hindu : National : Three-year road map to contain fiscal deficit

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Tuesday, Jul 07, 2009
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Three-year road map to contain fiscal deficit

Sandeep Dikshit

Economic situation turning for the better: Finance Secretary

NEW DELHI: Union Finance Secretary Ashok Chawla on Monday allayed fears of fiscal deficit reaching unmanageable proportions, saying the government had a three-year road map to pare it to four per cent by the end of 2011-12.

Mr. Chawla criticised stock market analysts for driving themselves into a frenzy in the run-up to the budget and did not subscribe to the view that Monday’s fall in the Sensex was due to a lacklustre budget.

Rather, stock market players looked at a “small part of the picture” — which was “what is in it for aspects that impinge on the stock market” — whereas the budget addressed a larger constituency. “The Sensex had been driven into a frenzy. And on not finding what they were looking for, there has been a temporary decline.”

Speaking at the customary press conference soon after the presentation of the budget, Mr. Chawla, flanked by senior Finance Ministry officials, felt that the domestic economic situation was turning for the better though the global economy was somewhat weak. “There is no reason to believe that the really difficult phase will last for more than a couple of quarters,” he said.

On the fiscal deficit, he said the figure during the current fiscal was expected to be 6.8 per cent. This compared favourably with the figure for the previous fiscal which stood at eight per cent — 6.2 per cent plus 1.8 per cent on account of issuance of oil and fertilizer bonds. However, he admitted that there was a slippage of 0.2 per cent from the originally envisaged six per cent due to the increase in the government and public spending to beat the slowdown.

Not anticipating issuance of fertilizer bonds next year due to the move to change the subsidy policy for the sector, the Finance Secretary expected fiscal deficit during the next financial year to be 5.5 per cent followed by four per cent in the following year. However, he did not give any commitment on oil bonds, maintaining that the Petroleum Ministry was seized of the matter. “There is no view on oil bonds. If there is some marginal requirement I don’t know,” he said, adding there would be no extra outgo on account of kerosene and LPG subsidy if crude prices remained below $60 a barrel. An expert group was being set up to look at viable and sustainable pricing of petroleum products, which, he admitted, was a very sensitive issue socially, economically and politically.

“We have not chosen to give an unrealistic target. The intention to resolve it is very clear. The situation of high fiscal deficit is not sustainable in the medium and long terms. We need to roll back and this will be done over a three-year time frame,” Mr. Chawla said.

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