Finance Minister Pranab Mukherjee on Tuesday stated the fiscal stimulus packages would not be withdrawn until the economic recovery is on a firm growth track. He said he would take a call on withdrawing from stimulus packages after being convinced that the economy had come out of the slowdown. Incidentally, the Finance Minister’s assertion came on a day when the Bombay Stock Exchange (BSE) nosedived, with the Sensex tanking 491 points to close at a two-month low of 15,404.94 on poor corporate earning results coupled with sluggish global equity markets in the wake of uncertainty over the pace of economic recovery.
Speaking at the Economic Editors’ Conference here, Mr. Mukherjee said that it was imperative to return to fiscal discipline “as soon as the current economic circumstances permit us to do so”. Even as mopping up of additional resources through disinvestment would help the government in consolidating its finances, the worrying factor was the fiscal deficit which has started shooting up to 6.8 per cent of the GDP (gross domestic product) under the impact of a series of stimulus packages. “There is no dearth of liquidity in the economy and inflation as yet is not a pressing area of concern,” he said.
Turning to the economic challenges at hand, Mr. Mukherjee said “the first challenge is to take the economy back to the high GDP growth of 8.5 to 9 per cent per annum and even beyond, at the earliest, and to ensure that it can be sustained for the next few decades.” The other two challenges before the government were improving governance and deepening inclusive growth and development, he said.
The Finance Minister conceded that the sub-normal monsoon would have an impact on the GDP growth rate. However, he said: “We may fare better than the initial estimates of the decline in food production and agriculture GDP”.
Expressing concern over the low offtake of credit, he said banks have been asked to take advantage of coming busy season and enhance credit flow to need sectors of the economy. “…an all-out effort is being made to ensure that credit off-take to employment generating sectors, especially agriculture, and micro and small enterprises picks up,” he said.
On disinvestment, Mr. Mukherjee said that apart from NHPC and Oil India, a few other state units have been identified for offloading of small portions of government holding and issues of fresh equities to meet their funding needs, if needed. While the government has already approved disinvestment in NTPC, Satluj Jal Vidyut Nigam and Rural Electrification Corporation, the timing has not yet been decided as that would depend on the sentiments on the bourses. On the issue of black money, the Minister said a team of officials would go to Switzerland to negotiate on amendment of the tax treaty. As for the searches by IT department on the premises of former Jharkhand Chief Minister Madhu Koda and his associates, the Mr. Mukherjee said investigations “are on as per the law”, but argued against generalising the issue of corruption to the entire political class.