India must bring down high fiscal deficit: PM
Rating agencies criticise India's public debt level, estimated at over 80% of GDP, citing it as one of the biggest impediments to double-digit growth.business Updated: Jan 07, 2006 18:59 IST
India's fiscal deficit remains unacceptably high and must be brought down, Prime Minister Manmohan Singh told a business conference on Saturday.
Rating agencies criticise India's public debt level, estimated at more than 80 per cent of GDP, citing it as one of the biggest impediments to a rating upgrade and sustained double-digit growth needed to alleviate poverty.
"While we do still have unacceptably high fiscal deficits, and we must bring the level down, our record of fiscal management and the transparency of our budget process as well as the health of our financial system has served us well," said Singh.
A Reserve Bank of India (RBI) report showed last year the combined state and central deficit in Asia's third-largest economy fell to 8.3 per cent of gross domestic product (GDP) in the year 2004/2005 (April-March) from 10 per cent in 2001/02.
The combined fiscal deficit is budgeted to drop to 7.7 per cent of GDP in the year to March 2006, but analysts say various social sector spending plans of the Congress-led government could see finances come under pressure.
The government hopes to limit the central deficit to 4.3 per cent of gross domestic product in the year to March 2006.
Singh said prudent fiscal policies helped India tide over a crisis in 1990-91 and the country must strive hard to retain its reputation for sound fiscal management.
But the Prime Minister cautioned that hard choices have to be made to sustain high growth. "I don't have to tell you that money does not grow on trees. We cannot spend our way to prosperity," Singh said.
Singh, who is the architect of India's more than decade-old reforms, urged the state governments to come together and help formulate sound economic policies for sustained high growth.
He said he would interact with state chief ministers to evolve a consensus on power reforms and labour policies to boost employment. The government's communist allies have opposed plans to make hiring and firing of workers easier.
India has embarked on what is called the second generation of reforms and most of the legislative and administrative changes require active participation of India's 29 states to enable the benefits of reforms to trickle down and help cut mass poverty.
First Published: Jan 07, 2006 18:59 IST