Fiscal stimulus in India figured prominently in the global meet of world political and business leaders here with the UPA government promising a “substantial” package in the next Budget it it comes back to power.
“The real budget will be presented by the government after the elections. But we are working on what that Budget should be. And certainly, if this government comes back, as I hope it will, then that Budget will include a very substantial fiscal stimulus aimed at the infrastructure sector”, said Planning Commission Deputy Chairman Montek Singh Ahluwalia.
He told a press conference on the sidelines of the World Economic Forum meeting that it was not a political issue and “this is what I would recommend” whatever the government.
However, speaking at India Brand Equity Foundation function at the WEF, Commerce Minister Kamal Nath regretted that liquidity injected by the government and the central bank had not reached the cash-starved industry and consumers. “The liquidity is still not credit. Now the challenge is to make banks lend”, he said. In view of the general elections, due sometime in April-May, the government will come out with an interim budget in a brief session in February. The final Budget is likely to be presented sometime in July-August.
Ahluwalia said the International Monetary Fund (IMF) might not be taking into account the probable plans of the new government and that was why it might be “a little more pessimistic about India in 2009 than I think we should be.” He said in 2008-09, India expected a growth rate of 7 per cent or a little bit lower. “I think the prime minister mentioned the range of 6.5 to 7 per cent. I am hoping we will be nearer to the upper end of that range.”
He the expectations and hope were that in 2009-10, India;s economic growth rate should not have to decelerate compared to the previous year.
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As regards exports, he said, “We can’t do anything about the loss of exports and hope that the world economy recovers quickly and there should be no relapse into protectionism. We have to accept that exports are not going to do well in the (near) future.”
Slowdown in capital flows from developed countries, he said, could be offset by stepping up financial flows domestically.
The government, he added, had increased the public investment target and was trying to promote public-private partnership projects in the infrastructure sector.