Ready with a contingency plan in case of poor monsoon, the government today conceded deficient rains would affect the economy but it was not time to press the panic button yet.
“The government is monitoring the situation on a daily basis. It is ready with a contingency plan. But I do not want to press the panic button,” Finance Minister Pranab Mukherjee said in the Rajya Sabha.
Winding up the debate on the general budget, Mukherjee said the delayed monsoon would have an impact on sectors like — electricity generation and water.
“If I press the panic button, what will I gain?” he asked. With the House approving the budget, Parliament has completed the first stage of budgetary exercise for 2009-10.
Mukherjee, however, said that the economy, particularly the manufacturing sector, was showing signs of recovery, thanks to four stimulus packages amounting to Rs 2.18 lakh crore given by the government since December last year.
“It (stimulus) has started yielding results. It is visible but slow," he added. The minister brushed aside the opposition's charge that the government had slowed down the economic reforms.
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“There is no question of diluting the process of economic reforms. Economic reforms is not a mantra which needs to be chanted every time now and then. It is a continuous process,” Mukherjee said, adding that every successive government since 1990 has carried forward reforms.
On concerns expressed by rating agencies over India's high fiscal deficit, Mukherjee said he had dealt with the extraordinary situation with extraordinary steps.
The fiscal deficit has been pegged at 6.8 per cent for the current financial year with government borrowings going up by as much as 40 per cent of its total expenditure.
“I am also concerned with that, but here the choice is very clear to me. Yes, (given) this high level of fiscal deficit, some international rating agencies S&P, Moody's and others can think of downgrading the rating, but the question is what would be the first priority of an Indian Finance Minister — to take care of the Indian poor or to adhere to satisfy the requirements of a rating agency?” he said.
Although the government's borrowing programme was a staggering Rs 4 lakh crore, the minister allayed apprehensions that it would crowd out the private sector from the debt market or jack up interest rate.
“There is no reason to be concerned about private sector being crowded out because of increased government borrowing, nor there should be undue concern about increase in nominal interest rates,” he said.
The government borrowings are being supported by RBI's open market operations (OMO), through which the central bank sucks out or injects liquidity into the system against government papers, Mukherjee said, adding that the government does not have any intention of monetising its debt.