Fiscal consolidation needed: finance ministry report

Fiscal consolidation needed: finance ministry report

New Delhi: Govt will continue to focus on fiscal consolidation by cutting down unproductive spending, as part of its efforts to sustain a high growth rate, the finance ministry said in its quarterly review on Tuesday

India’s fiscal deficit is projected to swell to a record 6.8% of gross domestic product in the fiscal year 2009-10 (April-March) that has to be funded by a record high borrowing of Rs4.51 trillion ($95 billion).

“...The process of fiscal consolidation which is a pre-requisite for sustained growth, continues to be in focus," said the report presented by the finance minister to parliament.

The report also said efforts were being made to improve cash management and cut expenditure in non-priority areas.

Last month, the government decided to step up public spending to support a fragile economic recovery.

In the July budget, the government outlined plans to cut the fiscal deficit to 5.5% by 2010-11 and further to 4% in 2011-12 following a recovery in the economy.

Asia’s third largest economy expanded by 6.7% in 2008-09, slowing from the scorching 9% or more recorded in the previous three fiscal years.

Last week, the central bank said the economy could grow 6% with an upward bias and warned of price pressures by end of the fiscal year to March 2010.

“...Government will continue to take necessary measures to moderate inflation, prune unproductive expenditure and closely monitor FRBM (Fiscal Responsibility and Budget Management) targets," the finance ministry report said.

Country’s wholesale price index fell 1.54% in the 12-months to 18 July despite a rise in food prices, but analysts said inflation could soon return.

However, the consumer price index — which attaches greater weighting to food products — stood firm at 9.29% in June.