Pinning hope on government’s resolve to get rid of impediments to growth, Planning Commission Deputy Chairman Montek Singh Ahluwalia on Sunday said the 6.5 per cent economic growth projection for next fiscal is reasonable.
“... if you have taken corrective steps needed to get rid of impediments to growth, projecting 6.5 per cent is not too much ... The 6.5 per cent economic growth, is not that unreasonable”, Mr. Ahluwalia told in a CNN-IBN programme Devil’s Advocate to Karan Thapar.
According to him, registering 6.5 per cent economic growth would be achievable in the backdrop that India’s last decade long term average GDP growth is 7.3 or 7.4 per cent.
Commenting on the Union Budget whether this is the right response to the challenge economy is facing at present, he said, “...the biggest challenge right now is huge micro imbalance, very large fiscal deficit which is mirrored in balance of payment by large current account deficit. Now we want to get that in balance, not get the risk of running out of foreign inflows, is important to reduce the fiscal deficit. That big message the budget does have.”
On whether Finance Minister went for a big cut of around Rs 92,000 crore in Plan expenditure to reduce the current financial year’s fiscal deficit to 5.2 per cent of GDP, he said this happened because of strict enforcement of rules by the Finance Minister.
“There are rules that say that only spend certain proportion of what you are going to spend in year as a whole in the last three months. Using that (rules), basically what has happened is that slow expenditure in the nine months of year has lead to lower expenditure for the year as a whole”, he said.
“But the important thing is that in the last year, there was a big increase because we want to give good start to the 12th Plan. The fact is that the ministries took too long to get the act together.”
About the doubts that lesser Plan expenditure would hurt growth prospects, he suggested that economic growth will not depend only on government spending and by “the restraint on government expenditure has to be offset by big increase in private investment and public sector investment which is not in the budget. If that happens, the growth will take place.”
He said the fiscal deficit target of 4.8 per cent of the GDP next fiscal was “achievable”.
On the issue like burgeoning petroleum subsidy could pose a problem for government in meeting fiscal deficit target, he said, “Not all the diesel subsidy is paid out of Budget because part or that under recovery is borne by the companies themselves so that impact on the budget could not be very substantial.”