Pranab is hopeful of being able to reduce fiscal deficit
Finance Minister Pranab Mukherjee on Tuesday asked institutional investors to have faith in the India growth story and remain optimistic on the long-term prospects of the economy and not be swayed by the current volatility in the country's bourses.
At a meeting with over 30 Indian and foreign institutional investors (FIIs) here, Mr. Mukherjee said that the optimism should stem from “a long-term view of the economy and its performance rather than being disturbed by the short-term statistics.”
According to an official statement, Mr. Mukherjee assured the FIIs and other investors that the next generation financial sector reforms have already been initiated. These, among other steps, include “the widening and deepening of the Indian securities markets, liberalising the policy on foreign capital flows, strengthening the regulatory and other institutional architecture and reducing transaction cost in the securities markets.”
The Finance Minister said he was hopeful of being able to reduce the Centre's fiscal deficit to the budgetary target of 4.6 per cent of the gross domestic product (GDP) and pointed out that his confidence stemmed from the provisional figures for 2010-11 which showed achievement of numbers better than what was targeted.
Mr. Mukherjee struck an optimistic note on the trajectory of the economy and felt that the economic growth this year could be around 8.5 per cent. He also assured the investors' group that revenue collection was not likely to see any decline and hence there need not be any undue fear on the issue of fiscal deficit. On the issue of fuel subsidy, Mr. Mukherjee said it was difficult to accurately estimate the burden on the government, especially in view of the volatility in the international crude prices. However, if there was any requirement of additional subsidy, funds would be committed with least impact on the fiscal deficit, he said.
On the issue of achieving the disinvestment target, Mr. Mukherjee said that it would also be “too premature to reach a judgment as only the first two months of the financial year have gone by.” Underlining the government's resolve in this regard, he said the public issue of Power Finance Corporation (PFC) was already completed in May to raise Rs.1,145 crore. He reminded the investors that the disinvestment programme in 2010-11 was not pursued with “extra vigour” as the 3G/BWA spectrum auctions had brought in higher revenue than anticipated earlier.
Referring to inflation, Mr. Mukherjee said that it was likely to be moderate in the months ahead, especially as the monsoons are expected to be normal and thereby strengthening the economic prosperity of farmers. As for foreign direct investment in insurance and retail, Mr. Mukherjee assured the gathering that consultations were under way and the Centre would make all efforts to build a consensus in this regard.