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Economy recovering: FM
Published on 15 Jul. 2009 12:25 AM IST
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Finance Minister Pranab Mukherjee Tuesday said the Indian economy was showing signs of recovery even as he defended the government's high fiscal deficit and borrowing programme as necessary to fund welfare schemes and spur growth. Replying to the debate on the national budget in the Lok Sabha, the lower house, he also categorically said the United Progressive Alliance (UPA) government remained committed to divesting stakes in state-run firms without diluting their public sector character. "There are some early indications of recovery," Mukherjee said in his 50-minute reply on the debate pertaining to the national budget he presented July 6. "I see some turnaround in the third quarter of the current financial year." The finance minister said some positive signs were visible in sectors like steel and cement, which saw production rise 13 percent in June. While the auto industry saw its sales rise 13 percent, consumer durables continued to log double-digit growth. "This is a small beginning. We are not out of it yet. International business scenario is still not out of the woods. It will take some more time. But our strategy of generating internal demand, enhancing the purchasing power, has helped us." He also invoked the rain god Indra, as monsoon - on which depends 60 percent of India's farm sector - has been erratic this year, and said: "I am not pessimistic like others. There is still time. If we have good monsoon, it is possible we have higher growth rate." The finance minister had presented the $204-billion national budget July 6 that stepped up allocations for welfare schemes and infrastructure, along with a declared vision to reach the fruits of progress to each of the country's 1.17 billion people. Mukherjee said some members were not correct when they felt that only 1 percent of the total government's expenditure was earmarked for agriculture. "If you look at all the various measures, it is one-fourth of the total expenditure - 25 percent." He said looking at the way the 30-share sensitive index (Sensex) of the Bombay Stock Exchange (BSE) had moved after his budget, he had sensed some disappointment that not enough was spelt out on the government's divestment policy. "Perhaps, people expected me to announce the names of the companies and how much money we intend to raise," Mukherjee said, adding the government's policy on divestment was spelt out in President Pratibha Patil's address to the joint session of parliament last month. The finance minister said the process to divest stake in state-run companies had already begun. "My ministry has initiated the discussions for identifying the undertakings," he said, adding: "Details will be announced in due course." The budget had hoped to raise Rs.1,120 crore (Rs.11.2 billion/$224 million) this fiscal by divesting in units like RITES, Cochin Ship Yard, Manganese Ore, Telecommunications Consultants India, Rashtriya Ispat and Satluj Jal Vidyut Nigam. During the reply, Mukherjee also said high borrowings of the government and the large fiscal deficit, pegged at 6.8 percent of gross domestic product (GDP), were inevitable given the need to push growth and allocate more funds for welfare programmes. "I had to take this risk. But I do believe that it is not possible to sustain this level of borrowings. We have to go back to high economic growth," he said, referring to his fourth career budget and the first for the new UPA government. He said he was aware of the criticisms by some members during the course of the debate, particularly on high government borrowings, pegged at Rs.391,000 crore (Rs.3,910 billion/$78.2 billion), and the resultant fiscal deficit. "I have taken a tremendous step as finance minister with the hope that there will be a turnaround," Mukherjee said referring to India's economic growth slipping to 6.7 percent last fiscal from over 9 percent in the preceding three years. At the same time, he added, some members were also complaining that some of the flagship programmes of the government to tackle poverty across the country were inadequate. "Should there be no enhancements in outlays of those projects?" Mukherjee queried, while adding this was necessary to reach the benefits of growth and development to the teeming millions of the society. The finance minister also thanked fellow lawmakers, especially young parliamentarians, for the participating in large numbers in the debates on both the rail and the national budgets with keen interest. "This clearly demonstrates the Indian democracy is entering a new phase."

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