Slew of steps underway to contain fiscal gap

Conceding that the budgeted fiscal deficit target of 5.1 per cent of the GDP (gross domestic product) would be difficult to meet, the Finance Ministry, on Tuesday, sought to assure India Inc. that the government had geared up for corrective action and listed a slew of measures in the pipeline aimed at containing the fiscal gap and promoting investments to change track to the higher growth trajectory.

In his address to apex chamber FICCI’s national executive committee here, coming as it did in the prevailing air of despondency and pessimism, Economic Affairs Secretary Arvind Mayaram provided a preview to the better days ahead following activation of concerted steps pertaining to various sector of the economy.

“The budget has targeted [fiscal deficit at] 5.1 per cent [of the GDP]. I am not sure we will be able to reach 5.1 per cent but I can assure you that the government is fully seized to be somewhere very close to it and for that, whatever measure have to be taken will be taken…We must move towards higher growth trajectory and if there is a blip we need to find why and try address that and then see how we can move forward,” Dr. Mayaram said.

Fire-fighting steps

As part of the significant fire-fighting steps as far as investments are concerned to drive the GDP growth up from its nine-year low at 6.5 per cent last fiscal and 5.5 per cent in the first quarter of 2012-13, the DEA Secretary referred to Finance Minister P. Chidambaram’s meeting on Wednesday with the chiefs of nine cash-rich public sector undertakings (PSUs) in a bid to persuade them to go ahead with their investment plans which have been kept on hold.

Pointing out that the government has identified these nine PSUs with large cash reserves lying idle, Dr. Mayaram said: “On the 12th [Wednesday], the Finance Minister is having a meeting with the CMDs of these corporations and the administrative secretaries concerned to put in place a timeline for these to begin to invest…The impact of that will be seen very quickly in the time which is ahead of us…these nine in fact have cash of about Rs 1.80 lakh crore and they have investment plans which they have put on hold”.

As for the steps required to contain the fiscal deficit, Dr. Mayaram reminded the captains of industry of the hardships that it would entail and referred to Mr. Chidambaram’s statement with regard to the government’s plan of action to correct the economic ills afflicting the country. The government, he said, “intends to take steps to correct the fiscal deficit. It will not happen in one day.’’ Correction of fiscal deficit would also mean hardship and that hardship will have to be across the board while noting the Finance Minister’s observation that the decisions “not only impact those who are in the middle class or lower middle class but it will also possibly impact those who are in the higher classes...I think we need to be prepared for that.’’

Other initiatives

Listing the other initiatives that have been planned to boost growth, Dr. Mayaram said the Finance Minister would take up the issue of clearance of pending projects with the Union cabinet as a number of large projects entailing investments worth Rs.1.50 lakh crore remain held up on account of delays in statutory clearances.

“We have also identified, for instance, presently just in two sectors — roads and petroleum — there are projects which are waiting for clearances and are ready for investments…The total investments locked up for statutory clearances etc in these two sectors is almost of the order of Rs.1.50 lakh crore,” he said.