Union Finance Minister Pranab Mukherjee said that Indian agriculture was expected to clock a negative growth rate in the third quarter of 2009-10 which was a cause for concern. He felt that the impact of the drought was exaggerated and an alarmist attitude led to hoarding although there was no shortage of foodgrains.
Addressing a meeting organised by the Indo-American Chamber of Commerce here on Thursday, he said there was no reason to believe that excess liquidity in the system was causing inflationary pressures. He admitted that inflation has to be controlled adding that its impact on the poorer section of the people could be minimised through the public distribution system but the State governments would have to play their role to implement it. “The distribution mechanism is faulty,” he said. The State governments also needed to carry out de-hoarding operations.
Mr. Mukherjee said that the Indian economy was moving ahead despite all its problems and the private sector was the major engineer of growth. Expressing concern about agriculture, he said that while the second quarter growth was less than one per cent, in this quarter (October to December), it may become negative. “This will determine GDP (gross domestic product) growth,” he said. “We have to ensure measures to check this problem.”
Mr. Mukherjee said that for a full month, he would hold meetings with chambers of commerce, trade bodies, trade unions, state finance ministers and some important public and private sector companies to “expose myself to various suggestions and expectations of the various segments.” He said that his response would come through the Central budget.
He said that while the three doses of stimulus involving an outgo of over Rs. 2-lakh crore helped prevent any slide in the GDP growth rate, it did create a huge fiscal deficit. “We have to come to fiscal consolidation. The exit policy should not either be too late or too early. A balance has to be struck,” Mr. Mukherjee said.
On the roll-out of GST on April 1, 2010, the Finance Minister said while efforts were on to meet the deadline and another meeting had been fixed for January 8, but a roll-out seemed difficult without a convergence of the divergent views that had arisen. There was divergence about the quantum of compensation on Central Sales Tax as also the method of payment of the compensation. “Unless we resolve the old issues we cannot take new commitments,” the Finance Minister said.