Policy rates review if inflation continues to moderate: Chidambaram.
Our Bureau
New Delhi, Oct. 22 For the first time, the Finance Minister, Mr P. Chidambaram,
has conceded that the Government may overshoot the fiscal deficit target for
the current fiscal, thereby, implying that there would be some slippage in
adhering to the mandatory provisions of the Fiscal Responsibility & Budget
Management (FRBM) Act.
"Thanks to the global financial crisis that is exerting pressure on all the
economies, it is perhaps likely that we will overshoot the budget target of
fiscal deficit and revenue deficit," Mr Chidambaram said at a USAID conference
here on Wednesday.
In budget 2008-09, the fiscal deficit target was pegged at about Rs 1,33,300
crore or 2.5 per cent of gross domestic product (GDP). The Finance Minister had
on Tuesday said that the Government would borrow more than the targeted amount
of about Rs 1,45,000 crore in view of the additional expenses.
The Finance Minister said that the Government would strive to be as close to
the target as possible. "Even if we do not achieve the targets by March 31,
2009, I am sure we can achieve it by March 2010," Mr Chidambaram said.
The Finance Minister's observation on overshooting fiscal deficit comes on the
heels of the Lok Sabha approving an additional spend of about Rs 1,05,614 crore
in cash to take care of expenses such as fertiliser subsidies (about Rs 38,863
crore), sixth central pay commission payout of about Rs 29,000 crore (including
bonus) and national rural employment guarantee programme payment of Rs 10,500
crore.
RATE REVIEW
Later in the day, the Finance Minister assured the Rajya Sabha that the
fundamentals of the Indian economy was strong and that government would review
policy rates if inflation continued to moderate. "If inflation continues to
moderate, we will revisit the rates (policy rates). We have to revise policy
whenever it is time to do it," Mr Chidambaram said in the Rajya Sabha during
the discussion on supplementary demand for grants for 2008-09.
He highlighted that the Government and the RBI had taken pre-emptive measures
(to deal with the global crisis).
On liquidity situation, the Finance Minister said that there was no reason to
infuse further liquidity if the situation remains benign.
"We have taken steps which have been decisive and which have completely altered
the liquidity situation," Mr Chidambaram said. Call rate that touched a record
high of 23 per cent a fortnight back is down to 6 per cent now.
Market fall
On the recent fall in stock markets, he said there was no need to worry too
much about stock market indices. "The stock market is only an index of 30
stocks in the Sensex and 50 stocks in the Nifty. Markets will go up, markets
will come down. If anticipation is that earnings will be high, (share) prices
will be high, if anticipation is that earnings will be low, prices will be
low," he said.
The Finance Minister said foreign institutional investors (FIIs) were selling
here because there was redemption in their own countries and not because there
was fundamentally something wrong with the Indian economy, which he said
continues to remain strong.
Meanwhile, Parliament has approved the supplementary demand for grants for
2008-09.
http://www.thehindubusinessline.com/2008/10/23/stories/2008102351920900.htm
Fear is not the natural state of civilized people.
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