Stimulus packages now bearing fruit, sectors reviving: Pranab

Stimulus packages now bearing fruit, sectors reviving: Pranab
The Economic Times, July 16, 2009, Page 8

ET Bureau, NEW DELHI

Finance Minister Pranab Mukherjee on Wednesday underscored his intention to continue stimulating the economy than trimming the mounting fiscal deficit now. The government is betting on an economic revival for higher tax receipts later.

"What is required right now is to achieve high growth in the shortest possible time," Mr Mukherjee said in Parliament, where the budget for 2009-10, the largest ever with expenditure proposals exceeding Rs 10 lakh crore, was approved by the Lok Sabha and Rajya Sabha on Wednesday.

The minister added that four stimulus packages, including this year's budget, amounting to Rs 2.18 lakh crore have started bearing fruit in many crucial sectors of the economy.

Output of major steel producers grew 13% in June this year, cement production increased by 13.1% and automobile sales rose 17.4%, the minister said in the Upper House of Parliament.

"It (stimulus measures) has started yielding results and I must say it is visible but it is slow," he said.

"In absolute terms, the first three fiscal stimulus amounted to Rs 1.86 lakh crore and the fourth one also will add an additional sum of Rs 35,000-36 ,000 crore and will almost total to Rs 2.18 lakh crore," he added.

The first stimulus package was announced in December last year, followed by two more in January and February this year prior to this year's full budget announced last week. The government expects 7% economic growth this fiscal after the economy expanded at the rate of 6.7% last fiscal, sharply slower than 9% or more in previous three years.

The minister said priority is given to betterment of the poor over satisfying credit rating agencies, although he was concerned over the projected fiscal deficit of 6.8% of the GDP. The government plans to trim deficit to 5.5% of GDP by March 2011 and to 4% in the following 12 months.

"Yes, (given) this high level of fiscal deficit, some international rating agencies S&P, Moody's and others can think of downgrading the rating, but the question is what would be the first priority of an Indian finance minister—to take care of the Indian poor or to adhere to satisfy the requirements of a rating agency?" Mr Mukherjee asked Parliamentarians.

"I am deeply concerned. My officers are in touch with them, but please remember you will say that these are extraordinary situation... it demands extraordinary solution and extraordinary steps," he said.

Ratings of 34 countries, including UK, have been downgraded by many such organisations , he added. Earlier, global rating agency Standard and Poor’s had downgraded the outlook on India's ratings after the interim Budget, which had pegged fiscal deficit at 5.5% of GDP in the current fiscal.