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Govt to cut deficit, but high oil price a risks: PC

Welcoming the high growth f'cast of ES, FM said Govt will cut deficits but upward pressure on interest rate and oil prices posed "risks".

india Updated: Feb 27, 2006 16:38 IST
Press Trust of India
Press Trust of India

Welcoming the high growth forecast of Economic Survey, Finance Minister P Chidambaram said on Mondaygovernment will cut deficits as per FRBM Act but high global oil prices and upward pressure on interest rate posed "risks" to the economy.

"We are happy with the growth forecast (of 8.1 per cent for 2005-06)," he said, adding that the GDP growth outlook was "quite bright".

The survey points out to a steady improvement in the infrastructure, increase in plan expenditure and capacity addition, which is taking place, he told reporters outside Parliament.

"All these are part of the virtual cycle of higher savings, higher investment and higher growth," he said.

The current account deficit is an indicator of more investment in the country, the minister said.

However, he identified three "downside risks" -- government's deficits, high global oil prices and upward pressure on interest rates.

On fiscal deficit, he said: "We should not be tempted to stray from the path of fiscal prudence... We will meet FRBM targets in 2006-07."

Chidambaram expressed concern over the global oil prices, which continue to be "high" but said the government will address the issue of oil subsidies.

Interest rates world over are hardening but Government and RBI has managed to meet the credit needs of productive sectors, he said.

On inflation now at 4.1 per cent, he said we are happy to see this, as there was a time when the inflation was at 8.1 per cent and growth was 4 per cent."

First Published: Feb 27, 2006 16:38 IST