JOIN USPrivate sector won't starve for funds: FM
“The government borrowing will be managed in such a manner, that there is no disruption in the market in favour of the government borrowings and starving of the private sector,” Finance Minister Pranab Mukherjee told reporters after his post-budget customary interactions with the RBI board here. As per the budget estimate, net borrowing by the government for the current fiscal is pegged at a whopping Rs 3,97,957.47 crore to fund its widening fiscal deficit, projected at 6.8 per cent of GDP this fiscal due to a slew of stimulus packages provided to the economy, still facing impact of financial meltdown.
No contradiction
“I wanted to reassure, there is no inherent contradiction between the monetary policy (of RBI) and fiscal policy (of the Government). We are working in close cooperation (with the RBI), we have done it in the worst period of the present crisis.” Last fiscal also RBI managed the substantial level of borrowing in smooth manner, he said, adding borrowing target of the Government was raised as it provided three stimulus packages hitting its revenue and rising expenditure, thus widening the fiscal deficit.Due to the global financial crisis, borrowing was increased from about Rs 1,00,000 crore to Rs 3,00,000 crore during 2008-09 and the RBI was in a position to manage the borrowing programme of the government without any disruption in the market, the Finance Minister said.As a result the fiscal deficit increased to 6.2 per cent of the GDP in 2008-09 against budget estimates of 2.5 per cent.
Explaining the rationale for the high borrowing, the finance minister said “I choose to come back to path of our growth trajectory, and the private investment cannot be expected to meet the full requirement in immediate time, that is why it was decided to step up public expenditure and it has to depend heavily on borrowing.”
High level of borrowings projected in the Budget has raised fears that it would leave crowd out or leave little resources for the private sector, besides raising interest rates which will increase borrowing costs for the industry. This had led to stock markets plunging after the Budget.Asked whether there could be further moderation of the interest, Mukherjee said appropriate action would be taken as and when situation arises.
“These exercises are done constantly, and you just cannot expect some sort of omnibus reply, as and when the situation demands we adjust,” he added.
The meeting was attained by the RBI Governor, three deputy governors, finance secretary and other board members.