Planning Commission Deputy Chairman Montek Singh Ahluwalia on Monday steered clear of a debate on the timing of withdrawal of the stimulus packages even as he gave an assurance that India would not stand out in the world as an overspender on account of its fiscal deficit.
“You can be sure that Indian fiscal deficit will not stand out as a case of overspending ... because for the first time in 2009-10 , India’s combined fiscal deficit is actually lower than both the United States and [the] U.K.,” Mr Ahluwalia said.
On stimulus exit
Elaborating on the prevailing confusion on timing the stimulus exit while speaking at a seminar on ‘Global economic crisis: Back to Keynes’ here, Mr. Ahluwalia noted that there was as yet no agreement the world over on when should they should be withdrawn and pointed to economists such as Joseph Stiglitz and Paul Krugman who have argued that a premature withdrawal of the stimulus measures could lead to a loss of gains.
“I don’t want to pronounce on it [withdrawal of stimulus] ... simply because one, it is a very difficult issue which the Finance Ministry and the government would be facing in couple of months from now when they present the Budget,” he said.
Earlier, speaking on the sidelines of the event, Mr. Ahluwalia said that the food price inflation was likely to ease by the end of next month.
“The dominant part of inflation that is a concern is food price inflation. I don’t believe that is the result of excess liquidity, though clearly, when inflation begins to go up, I mean, one of the instruments that people use is the monetary instrument. So I don’t want to speculate, I think to come to a conclusion because we have a problem with one set of prices, what is the ideal way of responding, that is a complex issue,” he said.
Arguing why the food inflation was likely to ease by next month-end, he said: “I think in our case, a lot of it has to do with expectations, managing the supply side and better use of existing stock. Plus, I think that with fears of the negative effect of the drought being reduced, there will be a softening in the food price inflation in the next month.”