Planning Commission Deputy Chairman Montek Singh Ahluwalia on Thursday maintained that the stimulus packages to combat the global meltdown should not only continue but the concessions given to industry should also remain in place till the country achieves a GDP (gross domestic product) growth of seven per cent.
In an interaction with reporters here, Mr. Ahluwalia said: “We need to think now about when we should be starting to moderate our stance. But for the present, there is no case for doing anything other than continuing the stimulus.” Seeking to correct an impression that the global economy has recovered, he said: “The fact is that the world economy has stopped going down, it’s beginning to recover but is still quite low”. Mr. Ahluwalia noted that for the current fiscal, the economy must do better than the 6.3 per cent expansion projected by the Planning Commission and the growth rate should first touch seven per cent before looking at exit from the stimulus measures. “Definitely, once we get to seven per cent growth and if inflation becomes uncomfortable...we need to look at these exit issues,” he said.
Inflation
On the issue of inflation, Mr. Ahluwalia conceded that while high food prices were a matter of concern, they would ease in the coming months and the economy would achieve a growth rate higher than 6.3 per cent. “Our GDP outlook of 6.3 per cent had possible upsides and downsides. Now the downsides are being removed. We feel that we could do a little better than 6.3 per cent…As long as we end the year with five per cent inflation, that’s a comfortable level. With the improved perception of the prospects for rabi [winter crop], you will see food price inflation moderating in the course of the year,” he said.
His optimism stemmed from the fact that farm production, as per current estimates, would not be as bad as anticipated by the government earlier. “Our national assessment is that the agricultural output is going to be less affected by the drought than we thought was the case six weeks ago,” he said. He was of the view that the floods in Andhra Pradesh and Karnataka are quite localised and unlikely to make a difference to the national forecast.
With regard to divestment of equity stake in public sector undertakings (PSUs), Mr. Ahluwalia maintained that the government should sell off as aggressively as possible to garner funds for critical sectors like health, education and infrastructure. “We are taking a string of individual decisions to disinvest and I think market conditions are good. So, disinvestment will take place,” he said.
The policy of the government and the Planning Commission has been that the Centre’s stake should not go below 51 per cent in State-owned companies. “Subject to that policy, we should use disinvestment as aggressively as possible in order to maintain a larger plan size…I personally feel that we should use the fullest flexibilities that we have. As long as 51 per cent is in government hands, nobody should be worried about that,” he said.
