| "We are still discussing with the finance ministry. So let's see how it goes," Ahluwalia said when asked when he expected the plan to get approved. |
| Ratings agencies worry that this will cause India's high fiscal deficit to widen further. |
| "We can increase the fiscal deficit, monetise it so that we can actually get the rupee resources to spend on infrastructure," Ahluwalia told reporters on the sidelines of a conference. |
| "And we can neutralise the negative effect of this monetisation by allowing more imports to come in," he added. |
| Economists have also expressed fears that inflation could rise drastically if planners get the $15 billion from reserves over three years they are aiming for. |
| Ahluwalia said he realised the concern about inflation and said a key component of his plan was to use monetised resources for importing goods and services directly for the infrastructure projects. |
| "The monetisation is important because merely increasing the fiscal deficit doesn't help as banks will buy government bonds and there will be less money to lend. And the monetisation effect should be countered by allowing reserves to go for imports. That's the core of the proposal," Ahluwalia said. |
| Rating agencies like Standard & Poor's and Fitch Ratings, which have a junk rating on India's sovereign debt, have recently expressed concern that the reserves plan could push up the bloated fiscal deficit and inflation. |
| India's fiscal deficit stood at 4.8 percent of gross domestic product in 2002-03 and the new government has committed itself to abide by the Fiscal Responsibility and Budget Management Act, requiring it to trim the deficit by 0.3 percentage points annually. |
| Ahluwalia said most of the increased infrastructure spending would go towards improving the country's road network, railways and ports. |
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