The Hindu : National : Expenditure stimulus is required: Montek

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Expenditure stimulus is required: Montek

New Delhi: Planning Commission Deputy Chairman Montek Singh Ahluwalia on Sunday endorsed the high fiscal deficit of 6.8 per cent as projected in the budget for 2009-10, saying increased government expenditure would stimulate growth.

“People raised a point that why risk a higher fiscal deficit. We have argued strongly that we need that expenditure stimulus because the global economic situation is very difficult,” Mr. Ahluwalia told Karan Thapar on CNN-IBN’s “The Devil’s Advocate” programme.

The projection of a high fiscal deficit has triggered alarm bells among investors and the industry.

“The fiscal deficit issue is a very important one. I am one of the people in the Planning Commission who have been arguing that we need that extra stimulus. I am actually grateful that the Finance Minister [Pranab Mukherjee] weighed the issue,” Mr. Ahluwalia said.

On whether the government borrowing would impede credit flow to the private sector, Mr. Ahluwalia said, “If you are tolerating a 6.8 per cent of the GDP fiscal deficit, I don’t think the Finance Minister needs to work out how they are going to do the borrowing.”

Whatever the government is going to do, it is going to be a certain drawing of resources. “ ... a basic logic of 6.8 per cent is that the private sector in this year is not going to be doing that much; otherwise there is no case for it.”

Mr. Ahluwalia said the top priority was to get the country’s growth rate back.

“...Our expenditure is oriented towards inclusiveness. We are trying to maintain a stimulus in the economy. Yes, the fiscal deficit is high but as the budget document shows, we will bring it down. That’s the message.” — PTI

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