New Delhi, July 11 (Inditop.com) Finance Minister Pranab Mukherjee Saturday sought to allay apprehensions that high government borrowings to fund welfare and infrastructure programmes will crowd out credit to industry and said loans at competitive prices will continue to be made available to India Inc.
“We will meet the requirements of the private sector from the market,” the finance minister told reporters here after a post-budget meeting with the top brass of the Reserve Bank of India (RBI) here.
“The government borrowing will be managed in such a manner that there is no disruption in the market in favour of government borrowings and starving of the private sector,” he added.
In the national budget presented July 6, Mukherjee stepped up the non-plan expenditure by 37 percent to Rs.695,689 crore (Rs.6,956.89 billion/$140 billion) over 2008-09 and the plan expenditure by 34 percent to Rs.3,25,149 crore (Rs.3,251.49 billion/$65 billion).
As a result, the country’s fiscal deficit was pegged sharply higher at 6.8 percent of gross domestic product.
The government hopes to fund the expenditure with a net borrowing of a whopping Rs.397,957 crore.
Mukherjee also said that the economic compulsions of the day demanded high government expenditure, especially in areas that had the potential to spur growth, like in welfare programmes that will put more money in the hands of rural public and infrastructure.
“Obviously, I choose to come back to the path of a higher growth trajectory and that private investment cannot be expected to meet the full requirement in the immediate future,” he said.
“That is why it was decided to step up the public expenditure and it had to be dependent heavily on a larger borrowing.”
The global financial crisis has tempered India’s growth trajectory, with its GDP moderating to 6.7 percent in 2008-09 from about 9 percent in the previous three years.
