No case for stimulus to boost moderating growth, says Montek
Planning Commission on Friday said there is no case for providing stimulus to the industry to arrest moderating growth as the fiscal deficit is high and may exceed the Budget estimate of 4.6 per cent by about one percentage point.
"I don't think it (slowdown) has happened because of lack of stimulus. What is the case for stimulus. In a sense, there is going to be a stimulus because the deficit will be exceeded," Planning Commission deputy chairman Montek Singh Ahluwalia said while speaking at the Hindustan Times Leadership Summit.
He conceded said that the fiscal deficit is likely to be above the Budget Estimate of 4.6 per cent of GDP.
"If you just count the different elements where there is deterioration it may look like one per cent (more than fiscal deficit budget estimate of 4.6 per cent). Net effect we don't know yet. But I did say it will be more than 4.6 per cent," Ahluwalia said.
He, however, said that there is no question of going for a stimulus package to boost growth.
"Already the fiscal deficit will be worse than budgeted estimate (of 4.6 per cent of GDP)... How much more I can't say. But there will be savings on expenditure. They (the government) may be able to reduce expenditure," he added.
The government's fiscal deficit has risen to Rs 3.07 lakh crore, or 74.4 per cent of the Budget estimates, in the first seven months (April-October) of 2011-12, as non-tax revenue growth has declined.
The economy expanded at the slowest pace in 2 years at 6.9 per cent in the July-September quarter of the current fiscal. For the first half (April-September) of the fiscal, the average growth rate is 7.3 per cent.
GDP growth in the second quarter of the fiscal slowed to 6.9 per cent from 8.4 per cent in the corresponding period last year, mainly on account of rising interest rates and uncertain global growth scenario.
GDP growth in 2010-11 stood at 8.5 per cent. Growth in eight core infrastructure industries also dipped to 0.1 per cent in October, lowest in five years.
"Slowdown has occurred because of (low) investment expectations, because of political uncertainty and I think because of delay in implementing infrastructure projects. We should concentrate on the last (infrastructure projects)... political mood will change within a period of time," Ahluwalia said.
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