The fiscal correction to set right imbalances between revenues and expenditure may time as the government is in no hurry to withdraw the incentives announced as part of measures to stimulate and revive growth in the economy over the past year in the wake of a global economic downturn, Finance Minister Pranab Mukherjee signalled on Tuesday.
“There is anxiety over fiscal correction…but fiscal stimulus has to continue till such time as it is required,” Mukherjee told media persons at the annual Economic Editors’ Conference organised by the government.
The government is looking at reducing subsidies to various oil and fertiliser companies and continue on its divestment path while trying to cut down on its ballooning fiscal deficit estimated at 6.8 per cent in 2009-10, Mukherjee said. “The Indian economy may have weathered the worst of the downturn,” he said, adding that there were “positive indications that growth will recover.”
Mukherjee said state governments have been advised to reduce non-plan expenditure, which refers to expenses such as subsidies that do not create productive assets. However, the states are free to step up plan expenditure, he added.
The minister is expected to discuss fiscal consolidation measures as well as the continuation of the stimulus package at the forthcoming G-20 summit of the world’s elite economies to be held in Scotland this weekend.
Mukherjee said the non-farm credit growth which has been significantly lower continues to be an area for concern.
“Now, an all out effort is being made to ensure that credit off take to the employment generating sectors, especially agriculture, and micro and small enterprises picks up. Banks have been asked to take advantage of upcoming busy season and enhance credit flows,” he said.