Premature to end fiscal stimulus: FM

Premature to end fiscal stimulus: FM
Business Standard, October 22, 2009, Page 8

Press Trust Of India / New Delhi

Finance Minister Pranab Mukherjee today ruled out any immediate plans to end the fiscal stimulus, as the global economy was still to show robust recovery. He, however, expressed optimism about the country’s economic growth.

Ahead of the monetary policy review on October 27 by Reserve Bank of India, he said he would hold discussions with the apex bank and would not like to comment on issues like where interest rates are headed.

“We took that (decision on stimulus). We took some risks, there is no doubt about it. Unless the world economy firmly recovers — signals are strong — perhaps it would be premature to think of exit policy. Therefore, I would like to watch the situation for some more time,” Mukherjee said.

He was asked if fiscal concessions given to the industry to overcome the global financial crisis that started last year would be withdrawn, given the inflationary concerns.

He was optimistic about domestic growth prospects, saying even the Prime Minister’s Economic Advisory Council’s (PMEAC’s) projection was on identical lines. The PMEAC expects the economy to expand by up to 6.75 per cent this financial year, while pegging inflation at near 6 per cent by March 2010.

“There has been more or less the broad outline that he (PMEAC Chairman C Rangarajan) has indicated in the economic outlook for 2009-10. We are also predicting like that,” he said.

On exports, Mukherjee said if there is no robust recovery in Europe and North America there cannot be any substantial growth in India’s exports. Nearly 62 per cent of exports are directed towards Europe and North American markets, he said.

“In my Budget I have given some money to Ministry of Commerce for exploring new markets, which would take time,” he added.

On the inflation concerns and the possibility of the interest rates going up, the finance minister said he would meet RBI Governor D Subbarao before the credit policy review.

“We will have the opportunity of discussing with the RBI Governor... I think before (the review) I will have some discussions,” Mukherjee said.

“We are working in close cooperation (and) the monetary policy and fiscal policy are moving hand-in-hand. Therefore, whatever corrective measures are required at whatever point of time will be taken,” he added.