Finance minister and Mayaram try to allay fears of stagnant economy.
Bureau Report
NEW YORK: India’s economic affairs secretary, Arvind Mayaram, tried to allay fears of a worsening economic situation in the country, saying the government will stick to its fiscal deficit aim and its borrowing plan, today.
Fiscal deficit for the current financial year ending March 31 will be at 5.3% of the country’s gross domestic product, “not more,” Arvind Mayaram said in Mumbai, reported The Wall Street Journal.
India’s fiscal deficit was expected at 5.1%, as per the government’s budget presentation in March. But the projection was later revised to 5.3% as revenue growth slowed down due to a lagging economy and high government spending, especially on subsidies.
The wider deficit had raised worries that the government may have to increase its market borrowing to fund the deficit, said the report.
High borrowing by the government squeezes the supply of funds available to private borrowers and pushes up bond yields, making it costlier for non-government borrowers to raise funds. In its budget presentation, the government had projected a market borrowing of 5.69 trillion rupees ($106.17 billion).
Earlier in the day, India’s Finance minister P Chidambaram said the upturn in the economy has started with indications of green shoots in the second half of this fiscal. He said more measures in the next few weeks and the next fiscal could help propel the country back to the 8% growth path, reported The Economic Times.
Chidambaram’s remarks came a day after his ministry disputed the GDP growth figures forecast by the Central Statistical Office, which in its advance estimates had forecast that India’s national income would grow only 5 % in FY 13 — the lowest since 2002-03.
“Going forward, I am confident that the economy will return to a growth rate of close to 5.5 %, which is satisfactory but does not make me happy,” he said. “We believe that the upturn has begun, it is a very low curve, its not a V-shaped upturn, it is perhaps a very long and shallow U,” Chidambaram told an audience of financial sector chiefs and executives.
India needs to grow at over 8% to absorb the new people who will enter the job market and therefore it was imperative to ensure that the economy is humming again. Chidambaram who has been credited with improving sentiment in the last couple of months after returning to the finance ministry in mid-2012 with executive action and policy measures said that the measures taken in the last few months and those planned for the near term and next fiscal could put India back on the 8 % growth path, said the Times.
Between 2004 and 2008, the Indian economy grew annually at over 8.5% on an average before the global financial crisis coupled with policy inertia and a series of scams dragged down growth.