Pranab warns against fiscal profligacy to avoid ‘humiliation’

Cautioning against reckless spending by the government, Finance Minister Pranab Mukherjee said he did not want a repeat of the humiliation India faced in 1991 when it had to pledge its gold for a few million dollars.

“I would not like any finance minister of this country to face that type of a humiliation,” Mr. Mukherjee told the Rajya Sabha in reply to the debate on inflationary pressure.

He recalled the time when the country’s gold was pledged to a foreign bank just to borrow a few hundred million dollars.

“When the finance minister of this great country had to go to a rich country to meet the finance minister of that country, he had to wait for some time to get the appointment,” he recalled.

Faced with a serious balance of payments problem in 1991, India pledged its gold for a few million dollars.

“It (the humiliation) happened because, whoever maybe responsible, we indulged in financial profligacy,” he said.

The Centre’s fiscal deficit targets were all disturbed after the government provided fiscal stimulus to the economy since late 2008 to fight the impact of the global financial downturn.

Against the target of 3 per cent during 2008-09, as mandated by a legislation, the fiscal deficit more than doubled to over six per cent.

Fiscal deficit further widened to over 6.5 per cent during 2009-10. The government estimates fiscal deficit at 5.5 per cent this financial year.