The government said on Monday that the Fiscal Responsibility and Budget Management Act (FRBMA) would be pursued only once the global economic situation returns to normal. Fiscal and revenue deficits have inched upward to touch 6 per cent and 4.4 per cent respectively as against the targeted 2.5 per cent and 1 per cent.
“It is important to take considered steps in the emerging situation…the government's fiscal stimulus package was key,” Arun Ramanathan, finance secretary told reporters after the presentation of the interim budget in Parliament. Ramanathan added that the advanced growth projection of 7.1 per cent offers “a glimmer of hope”.
Ramanathan pointed out that the government is yet to decide on how to fund the higher expenditure which is required to boost growth. The government in 2009-10 will raise Rs 3,08,647 crore, which is 17 per cent higher than this fiscal, of which Rs 45,000 crore will be come from sources other than market borrowings and private placement. “We will neither raise it through market borrowing nor private placement or bonds. We will decide on the modalities later.”
Ashok Chawla, secretary, economic affairs, said that the government's immediate job at hand was to ensure that the “economic growth comes back to its high growth path”. “Public spending therefore is crucial to revive general demand,” he added.
The government also underlined that inflation in 2009-10 could be around 4 per cent. The Reserve Bank of India has projected inflation to be at 3 per cent as on March 31, 2009.
Meanwhile, several public sector enterprises that were gearing up to enter the capital market have shelved their plans with the increase in volatility in the stock market. The PSEs are not likely to visit the market in the next four months, the government said.
Meanwhile, the World Bank has provided $4.2 billion of which $3 billion has been directed towards recapitalising public sector banks. Apart from the three banks – Uco Bank, Central Bank of India and Vijaya Bank – which have been recapitalised, UBI could also get a share of the booty.