GROWTH ANY DAY OVER FISCAL HOLE

WITH THE MAJOR GLOBAL MARKETS IN RECESSION, PRANAB MUKHERJEE SAYS HE HAD NO CHOICE BUT TO STEP UP GOVT FUNDING TO SPUR GROWTH

F
INANCE ministerPranab Mukherjee has clearly stated that growth tops his agenda. In his first post
budget interview, the FM explains the logic of the budget to Arnab Goswami and Andy Mukherjee. Excerpts:

Were you justifying the special circumstances in the backdrop of which you had to present this budget by quoting Kautilya in your speech?
    In fact, my primary objective has been to come back to the path of growth. Revenues are going down and external inflows have not yet started coming in. Therefore, I had to heavily depend on borrowing and at the same time taking the risk of crossing the targets set in the Fiscal Responsibility and Budget Management Act (FRBM). I have provided another stimulus through higher developmental outlay between the interim budget and this budget and have added another Rs 61,000 crore—Rs 40,000 crore to the Centre and Rs 21,000 crore to the states.
    The fiscal deficit of the states would be 4% of their gross state domestic product (GSDP) with the expectation that this money will generate demand internally and which will push up growth.
    I have no control over the external markets and exports which constitute more than 39% of the gross domestic product (GDP). I can provide some relief, but I cannot overnight improve the external markets. The European Union, Japan and the US taken together are nearly 70% of our export destination and they are all in recession.
    I had no option but to look at the internal markets. And, I have done exactly this. I hope that with a little bit of luck of a good monsoon, I'll be able to reach not less than 7% of GDP growth and once I come back on the growth trajectory, I can repeat the performance that was possible in the previous years. With 9% GDP growth rate, tax to GDP ratio also increases substantially.
You are looking at bringing down the fiscal deficit to 5.5% by 2010-11 and to 4% by 2011-12. How do you plan to bring down deficit?
    First, I am banking on higher growth. Second, I would explore the possibility of direct tax and indirect tax reforms such as the introduction of goods and service tax (GST) which I hope to introduce from April 1, 2010.
On divestment, the market was disappointed.
    I have stated very clearly that I would like to maintain public sector dominance in certain sectors, but in other areas I have given enough indications. But unfortunately the markets expected that I would read out the details of divestment in each company and raise Rs 25,000-30,000 crore. This is not possible.