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Pranab Mukherjee: Reviving Growth a Priority

27 May, 2009

Indian Finance Minister Pranab Mukherjee said on Wednesday reviving growth momentum was a top priority for the ruling coalition that was re-elected for a second term, but fiscal prudence would also be kept in mind.

Addressing a news conference, Mukherjee said the industry and business have been hurt by cost of finance.

Following are some key points from his news conference.

GROWTH, FISCAL PRUDENCE

* Reviving the growth momentum of our economy, which has been affected by the global financial crisis is the top most priority of this government. The fiscal prudence has to be kept in mind while taking steps for reviving the economy.

* A major consequence of the global financial crisis has been the loss of confidence in industry and business. Various coordinated steps taken by the government and the RBI (Reserve Bank of India) have stabilised the economy in a short period of time.

* We will try to reach the targeted growth rate figure but we cannot reach it overnight.

* One silver line is that the Indian economy has shown its resilence and our policy proved to be correct. When the developed economies all over the world collapsed, we maintained some level of growth, which not of course compared to the period of three years when we had sustained 9 plus percentage growth rate, but compared to other period 6.5 or 7 percent is not very mean figure. And I am quite confident that we will be able to maintain high level of growth.

* Borrowing has increased as I mentioned to you, and in the interim budget also I gave the figure. That’s why the fiscal deficit has been for the year 2008/09 6 percent. For the current year we have indicated 5.5 percent. I hope to stick to it.

* We are hopeful that an early return to our recent growth performance will help us come back to our preferred path of fiscal prudence.

* Let me say unambiguously that we are committed to restoring growth and employment and that would not have been possible without increased spending funded by incremental borrowing. This would need to be further continued in 2009/10 – the current year. * However, we are equally committed to the process of fiscal consolidation over a period of say 2 to 3 years.

OIL SUBSIDY

* I will examine them. Sectoral details I can’t give.

LIQUIDITY

* So far as the availability of liquidity in the system, we have eased the liquidity situation considerably by series of announcements made by the Reserve Bank governor.

COST AND AVAILABILITY OF FINANCE

* Industry and business have been hurt by the cost of finance and its weak availability. While much has been done in the last eight months and international capital flows have resumed, the cost and the speed with which finance can be accessed remains a matter of concern.

* The first step I propose to take is to meet the bankers and to get them committed to a more benign plan of action.

* I will expect that they will seek advantage of the monetary policy which the Reserve Bank has announced from time to time. And I will have to see how the credit is being made available quickly and to what extent it can be made cheap. These are the two objectives we have.

BUDGET

* We will be able to present the budget in the first week of July.

* It does not depend totally upon me but I will try to achieve that. As you know when I presented the interim budget, it was for four months up to July 31. I will try to complete the entire exercise by July 31.

* I have no hesitation in saying that alongwith reviving the momentum of growth and employment creation, our government will strengthen the various inclusive elements in the coming budget.

* Of course, Aam Aadmi (the common man) would remain as the focus of the proposals, which we are going to have as it was in the past.

STIMULUS, REFORMS

* We are assessing the impact of three doses of economic stimulus we announced in December, in January and in the interim budget.

* Sustained stimulus to growth can be harnessed by the next round of economic reforms. We have a broad plan of action in mind.

* Reforms are continuing one. Even when the situation is good and completely favourable, then also it requires some sort of changes. It is a continuing process. There can’t be stop and go in respect of this.

* We need to seize the opportunity presented by the current circumstances for pushing long pending reform measures. These include measures in the area of financial sector and real economy, to make the economy more competitive and the economic regulatory and oversight system more efficient, quick and responsive to global developments.


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Pranab Mukherjee: Reviving Growth a Priority

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