Veteran parliamentarian Pranab Mukherjee (73) formally assumed charge as finance minister on Monday — a post he has held a quarter century ago — and immediately held a series of meetings with top officials of his ministry to set the tone for a full budget presentation due in weeks.
Mukherjee held a series of meetings with all the senior officers and reviewed the status of various programmes and issues relating to all the departments of the ministry, an official statement said.
“Issues relating to forthcoming Budget were also discussed at the meetings,” the statement said. Officials said the progress of stimulus packages announced to revive growth was also discussed.
Finance Secretary Ashok Chawla, Revenue Secretary P V Bhide, Expenditure Secretary Sushma Nath, Chief Economic Adviser Arvind Virmani, Disinvestment Secretary Rahul Khullar, Central Board of Direct Taxes (CBDT) chairman S.S.N. Moorthy, and
Chairman of Central Board of Excise and Customs (CBEC) P.C. Jha attended the meetings.
The economic downturn is having a significant negative impact on the government’s finances. The fiscal deficit is set to go up sharply as the government announced a series of tax breaks to industry in the last few months to neutralise the adverse affects of the global slump caused by a credit bubble in the US.
A high fiscal deficit would reduce the new government’s ability to spend on social and development schemes, or announce more tax cuts to spur demand. A further cut in taxes would result in lower government revenues and therefore even higher deficit.
The Reserve Bank of India (RBI) is also running out of monetary options as it cannot continue to announce cuts in interest rates beyond a certain limit.
The government will have to present a full budget before August and could use the opportunity to announce more fiscal measures to boost growth in the backdrop of a gloomy economic data.
Finance ministry officials have already held the first round of pre-budget consultations with industry captains last week.
The country’s factory output contracted by 2.3 per cent in March, the lowest in 16 years, raising fears of a sustained industrial slowdown. Measures are also expected to stem the slide in exports that has contracted six successive months.
Higher public spending in sectors such as infrastructure and housing can have large multiplier effects across the broader economy.