Thursday, Nov 18, 2004
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By Our Special Correspondent
NEW DELHI, NOV. 17. The Finance Minister, P. Chidambaram, today declared that the time was opportune for the country to go forward with "bold reforms" even while agreeing with the Reserve Bank's estimate that economic growth would slow down to 6.5 per cent in the current fiscal. Given the buoyant outlook for the global economy, Mr. Chidambaram felt that it was an opportune moment for India to expand business internationally by taking advantage of policies aimed at global integration. "We should also go forward with more bold reforms," he said.
At the same time, the Minister conceded that the deficient rainfall in some parts of the country and the unprecedented hardening of international crude prices were likely to moderate output growth for the year despite 7.4 per cent being recorded in the first quarter. He said the RBI's projection of six to 6.5 per cent for the year "is consistent with our analysis as well." Noting that even at six per cent, India would be one of the fastest growing economies in the world, he said this was on the back of the 8.2 per cent growth last year and this should thus be considered satisfactory.
Addressing the annual Economic Editors Conference, Mr. Chidambaram said the encouraging growth in tax collections during the current year had "made us cautiously optimistic" about achieving the budget targets. "Restoring the health of public finances is one of our topmost priorities." Regarding the Fiscal Responsibility and Budget Management Act, which came into effect this year, he said: "The rules mandate us to reduce the revenue deficit by 0.5 per cent of the GDP and fiscal deficit by 0.3 per cent of the GDP at the end of each financial year." The 2004-5 budget aimed at bringing down revenue deficit to 2.5 per cent and fiscal deficit to 4.4 per cent of the GDP.
Mr. Chidambaram, who stressed that more fiscal steps would be taken, if needed, to stem inflation, described the record increase in global crude oil prices as the biggest economic challenge faced by the UPA Government during its six months in office. "The biggest challenge has been the threat to price stability and structural reform of the petroleum sector arising out of the unprecedented rise in global crude oil prices," he said. Through a combination of macro-economic management and carefully calibrated measures, the move from administered to market-determined prices had been restarted, while minimising the adverse impact of rising petroleum product prices on overall inflation and on citizens.
Besides, fiscal and monetary measures such as cutting customs and excise duties on petroleum products and steel, as well as increasing the Cash Reserve Ratio of commercial banks had been adopted for reining in prices.
Asked about the fate of the Planning Commission's proposal to utilise foreign exchange reserves for infrastructure development, the Minister said a decision would be taken in consultation with the Prime Minister. He pointed to the "stimulating debate" under way on the issue, and said he was "absorbing all the ideas" being discussed before taking a decision.
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