Finance Secretary defends withdrawal of stimulus package

New Delhi, Feb 27 (ANI): Commenting on the new Budget proposals, Finance Secretary Ashok Chawla said that the budget is pragmatic, balanced and realistic.

He said, "The economy has been through difficult times and it needed a booster dose in terms of higher public spending, which was provided and has done its job. But, at the end of the day the medium term and long term sustainability has to be built around fiscal prudence."

Ashok Chawla justified the need to reduce the deficit because it has a large number of undesirable effects.

Earlier on Friday, Mukherjee highlighted the key challenges facing the Indian economy as he spoke in the Lok Sabha.

Mukherjee announced plans to hike spending on social and agricultural programmes popular among voters, and adjusted taxes to put more money in the hands of the middle class.

Mukherjee said the government plans to increase market borrowing by 1.3 percent in his $239 billion budget, pushing bond prices lower as investors anticipated a flood of fresh debt supply.

Mukherjee also announced that the central bank is considering allotting new banking licenses to private-sector companies and non-banking finance companies in order to expand the reach of banking services to more areas.

The Reserve Bank of India said that it would come out with fresh guidelines for licensing of new banks.

Reserve Bank of India Deputy Governor Usha Thorat said, "What is being said that there will be new licences, why, so far for the last five years, we have not really given any new licenses."

"What the Finance Minister has said is that there will be considering new licenses, and there will be eligibility criteria. So, in all that we will keep in view the basic principles," added Thorat.

India's apex bank has been cautious of granting licenses to the private sector banks. The last banking license was allotted to Yes Bank Limited in May 2004.entre has planned record levels of borrowing next year and will count on surging economic growth to help cut its fiscal deficit.

The fiscal deficit for 2010-11 has been pegged at 5.5 per cent down from 6.9 percent in the current fiscal. The government plans to reduce it further to 4.8 percent in 2011-12 and 4.4 percent a year after that. (ANI)