Divestment, fiscal targets on track: FM
Pranab Mukherjee has made good the reform deficit of his Budget speech, asserting the government’s commitment to disinvestment, financial sector reform, fiscal discipline and other policy and administrative reform.
By ET Bureau |
NEW DELHI: Finance minister Pranab Mukherjee has made good the reform deficit of his Budget speech, asserting the government���s commitment to disinvestment, financial sector reform, fiscal discipline and other policy and administrative reform.
He used his reply to the Lok Sabha debate on the Budget to address the concerns that have been cited in the media as being responsible, at least in part, for the 869-point plunge of the benchmark, Sensex, on Budget day. He also defended the government���s efforts to boost the farm sector.
He also sought to allay apprehensions over the government���s huge borrowing programme of close to Rs 4 lakh crore impacting the cost and availability of funds for private sector investment. More than half of it would be supported by the central bank���s open market operations (OMO), he said, adding that OMO was not monetisation of the fiscal deficit.
He further responded to the criticism on the runaway fiscal deficit, giving a two-fold defence. One, without expanded and sustained government expenditure, it would not be possible to sustain the economy���s growth momentum, and, two, the government is committed to bringing the deficit down to 5.5% of GDP in 2010-11 and to 4% of GDP in 2011-12, as the economy gets back to its growth trajectory.
Rather than being defensive about the fiscal deficit, he said that it is the government���s expenditure, financed by unprecedented levels of borrowings, that had allowed India to continue to grow even as most parts of the world contracted.
���I have taken a tremendous step as finance minister with the hope that there will be a turnaround.���
���This is a small beginning. We are not out of it yet. International business scenario is still not out of the woods. It will take some more time. But our strategy of generating internal demand, enhancing the purchasing power has helped us,��� the finance minister said.
Brushing aside criticism, muted and vocal in varying degrees from allies Trinamool Congress and DMK, and leaving no room for doubt over the Congress��� dominance of the ruling coalition, the finance minister asserted that the government would go ahead with selling shares in public enterprises.
Pointing at reports on his ���silence��� on disinvestment in his Budget speech, Mr Mukherjee said the President���s address to the joint session of both houses of Parliament had clearly spelt out the government���s policy on disinvestment.
He used his reply to the Lok Sabha debate on the Budget to address the concerns that have been cited in the media as being responsible, at least in part, for the 869-point plunge of the benchmark, Sensex, on Budget day. He also defended the government���s efforts to boost the farm sector.
He also sought to allay apprehensions over the government���s huge borrowing programme of close to Rs 4 lakh crore impacting the cost and availability of funds for private sector investment. More than half of it would be supported by the central bank���s open market operations (OMO), he said, adding that OMO was not monetisation of the fiscal deficit.
He further responded to the criticism on the runaway fiscal deficit, giving a two-fold defence. One, without expanded and sustained government expenditure, it would not be possible to sustain the economy���s growth momentum, and, two, the government is committed to bringing the deficit down to 5.5% of GDP in 2010-11 and to 4% of GDP in 2011-12, as the economy gets back to its growth trajectory.
Rather than being defensive about the fiscal deficit, he said that it is the government���s expenditure, financed by unprecedented levels of borrowings, that had allowed India to continue to grow even as most parts of the world contracted.
���I have taken a tremendous step as finance minister with the hope that there will be a turnaround.���
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On the back of positive signs in sectors like cement, steel, consumer durables and automobiles, the government said there were some early indications of economic recovery. ���This is a small beginning. We are not out of it yet. International business scenario is still not out of the woods. It will take some more time. But our strategy of generating internal demand, enhancing the purchasing power has helped us,��� the finance minister said.
Brushing aside criticism, muted and vocal in varying degrees from allies Trinamool Congress and DMK, and leaving no room for doubt over the Congress��� dominance of the ruling coalition, the finance minister asserted that the government would go ahead with selling shares in public enterprises.
Pointing at reports on his ���silence��� on disinvestment in his Budget speech, Mr Mukherjee said the President���s address to the joint session of both houses of Parliament had clearly spelt out the government���s policy on disinvestment.
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���My ministry has initiated discussions with other ministries and departments for identifying the public sector undertakings, where a portion of government shareholding can be sold, and for issue of fresh equity by the public sector undertakings to meet their fund requirements. The details are being worked out and would be announced in due course,��� he said. At the same time, he reiterated that state ownership would not fall below 51% in the disinvested companies.���It is our intention to enable the PSUs to benefit from techno-managerial efficiencies and become more competitive in the market,��� he said.
Economists view the FM���s statement as an attempt to address concerns of the market, which fell over 800 points after the presentation of the Budget.
���What was to have been in the Budget is now being enunciated. Budget was seen as a vision document... There was a big build up in expectation. He is a pragmatic finance minister and wants to ensure that markets do not get a wrong message,��� said Abheek Barua, chief economist, HDFC Bank.
The minister���s articulation of commitment to financial sector reform suggests that greater foreign direct investment in insurance and pension reform, issues that had been put in cold storage because of Left opposition during the UPA���s last term, would now be expedited.
The government will also take measures to deepen corporate bond market, improve futures markets and to make the financial sector more competitive with ���an efficient regulatory and oversight system���.
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Defending the Congress-led government���s track record vis-a-vis farmers, Mr Mukherjee said ���two major commodities which our farmers produce ��� wheat and paddy ��� please compare the step up which we have given in the minimum support price. The minimum support price of wheat has been raised from Rs 630 per quintal to Rs 1,080 per quintal in just five years. Please show me any five-year period before that shows such jump in wheat MSP.���Even as he spoke of a similar hike in the paddy MSP, Mr Mukherjee said: ���It will be increased further... But please remember that it is not a Budgetary exercise. This exercise is done by the appropriate ministry in consultation with the expert groups. What we have done is to address what farmers require.���
He said the government was committed to returning to path of fiscal prudence without compromising on the growth momentum as soon as the current situation improved.
���We cannot lose sight of the fact that much of our recent success in raising our growth trajectory has come about due to adherence to the Fiscal Responsibility and Budget Management Act (FRBM) targets, both at the central and state levels. Fiscal prudence is critical for maintaining a stable balance of payments, moderate interest rates and steady flow of external capital for corporate investment,��� he said.
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Mr Mukherjee cited some key factors that would help the government on its proposed quick march to fiscal health: front-loading of 11th Plan expenditure, no further liability on account of Sixth Pay Commission after 2009-10, recovery in tax collections and move towards unified goods and service tax from April 1, 2010. The finance minister also sought cooperation from all political parties for the introduction of GST at the scheduled date.Download
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