Limited scope for fiscal stimulus: C Rangarajan

NEW DELHI: Amid India Inc demand of booster dose, PMEAC Chairman C Rangarajan today said the scope for fiscal stimulus is limited in view of high deficit.

"We must reallocate expenditure in such a way that there is emphasis on capacity creation, there is emphasis on capital formation. Therefore, the direct answer is that the kind of stimulus that we provided in 2008, scope for that is not available," he said on the sidelines of an event organised by National Housing Bank here.

"We have to make an effort to contain fiscal deficit at the budgeted level. That itself is a very big task. Therefore, we need to look at govt expenditure," Prime Minister's Economic Advisory Council (PMEAC) chief said.

After overshooting fiscal deficit target by over 1 per cent in 2010-11, the government pegged the target for current fiscal at 5.1 per cent of the GDP.

Lower tax revenues and poor disinvestment receipts pushed up the government's fiscal deficit for 2011-12 to 5.9 per cent of the GDP, as against the target of 4.6 per cent.

The government had provided stimulus package worth Rs 1.86 lakh crore in 2008-09 to spur growth in the wake of economic slowdown.

Meanwhile, the industry chambers in its meeting with PMEAC requested that government in close coordination with RBI should announce economic revival package.

Besides, they have also suggested that there is an urgent need to create conditions for revival of private investment by ...further reduction in repo (short-term lending) rate by 0.01 per cent, and reduction of Cash Reserve Ratio ( CRR) by 0.01 per cent to boost the economy.