The Hindu : National : “It will take 6-9 months to measure impact of Pranab’s calculated risk”

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“It will take 6-9 months to measure impact of Pranab’s calculated risk”

Special Correspondent

There is no instant reaction in measurement of growth, says Finance Secretary

NEW DELHI: The Finance Ministry on Tuesday indicated that it would take the government 6-9 months to take a view on whether Finance Minister Pranab Mukherjee’s calculated risk in going for a high fiscal deficit of 6.8 per cent of the GDP (gross domestic product) in 2009-10 paid off in terms of higher growth.

In an interactive session with Secretaries of the Ministry, Finance Secretary Ashok Chawla said here: “There was no instant or chemical reaction in the measurement of economic growth. It will take six months, nine months, maybe 12 months to get the full impact of the outcome. But you can sense from various parameters, not just manufacturing, you can sense from exports and there are about half a dozen purchasers manufacturing indices of FMCG by which you can see whether there is a rise in demand for goods and growth is taking place.”

It would be around the time of the budget for the next fiscal in February 2010 when the monthly data for December 2009 would be available to help arrive at a conclusion.

The Finance Secretary was responding to a query whether the Ministry had an early warning mechanism in place to gauge whether the additional spending on various rural and infrastructure programmes during the remaining months of the current fiscal would get translated in terms of higher growth.

Explaining the monitoring mechanism in such programmes, Expenditure Secretary Sushma Nath said most of the spending was to be finally done in the States, and additional funds were released only after ensuring that the resources lying with them had been utilised properly for various schemes such as sanitation, drinking water and other rural programmes. “Care is taken to monitor the actual implementation on the ground.”

For this purpose, the Planning Commission, she said, had a tracking mechanism at the district, block and panchayat levels to ensure that allocated funds were properly utilised and not frittered away, resulting in expenditure without growth.

Fiscal deficit

On fiscal deficit, Mr. Chawla pointed out that to bring down the gap from 6.8 to 5.5 per cent of the GDP in 2010-11 and to four per cent in the following fiscal, the deficit had to be cut down by about Rs. 1.8 lakh crore through higher growth or otherwise.

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