New Delhi: Finance Minister Pranab Mukherjee on Monday said he gave broad indications to the next government on stepping up planned outlay in the full budget to beat the economic downturn, signifying that his budget speech was more of a pointer to the future.
In an interview to Lok Sabha TV, Mukherjee said the country should strive for 9% economic growth, even though it is down two percentage points due to slowdown.
He also mentioned constitutional constraints, which did not allow the government to take full corrective measures in the interim budget to give a boost to the economy.
“First there was constraint on taking corrective measures. The mandate of the government is coming to an end by 22-23 May ... Elections are due ... I can neither indulge in reckless borrowing nor go on imposing taxes without the mandate of Parliament. It will be a wrong thing to do,” the finance minister said.
Therefore, he signalled in the budget the areas that need to be taken up by the next government, he added.
“In my budget speech, I have identified areas which should be taken into account when the full budget will be placed. You may have to step up the plan outlay. I kept the plan size almost at the level of last year,” Mukherjee said.
As regards achieving a 9% growth rate, Mukherjee said the country will have to strive for it as the “immediate shock (has) brought it (the growth rate) down by 2 percentage points from 9% to 7.1%.
“We have absorption capacity and if we ... effectively in the short term yield results, then we will get (benefits),” he said.
The finance minister also said that at this point of time the rising fiscal deficit should not be over-emphasised, though fiscal discipline should be adhered to when the economy gathers pace.
Mukherjee said, “I have indicated that we should not be too obsessed with fiscal deficit ... if we are to cross that let us do so because all over the world this is the trend ... they are coming out with bailout packages ... and we should also do so. Of course corrective measures have to be taken.”
The interim budget revised the fiscal deficit to more than double at 6% of GDP for the current fiscal over the estimates of 2.5% estimated earlier.
For 2009-10, Mukherjee pegged the fiscal deficit at 5.5%.
“(The) revenue buoyancy we (had) for (the period) 2004-05 to 2007-08 is not there ... We shall have to take the risk of resorting to a larger fiscal deficit ... I have kept it (fiscal deficit) a little lower, 5.5% in 2009-10, which is less than 6% (for) 2008-09,” Mukherjee said.
He, however, added that the growing fiscal deficit is a cause for worry and in the medium term the objective of the government should be to maintain fiscal balance and reach the statutory obligations under the Fiscal Responsibility and Budget Management Act. This would be possible only through higher growth, he said.
Regarding enhanced borrowing being a serious cause for concern in future, he said that it depends on their regulation and usage. “It depends on effective use and borrowing through regulation, or it will be indulging in fiscal indiscipline. So we have to strike a balance,” he added.