India moving towards fiscal consolidation: Pranab

Chandra Shekhar

Paris, Feb 18 (PTI) Finance Minister Pranab Mukherjeetoday indicated that Indian government will return to fiscaldiscipline in the coming Budget, after following policies ofstimulus and expansion in the last two years.

Talking to reporters on the sidelines of the G-20 FinanceMinisters'' meeting here, Mukherjee said fiscal expansionarypolicies were required in the past, in the wake of globalfinancial crisis.

With the growth returning to high trajectory, "we shouldcome back to the path of fiscal consolidation. We arefollowing that," he said.

Fiscal deficit in India''s budget had ballooned to 6.8 percent of the Gross Domestic Product in 2009-10 and was peggedquite high at 5.5 per cent for the current fiscal, as thegovernment had to provide stimulus dose worth billions ofdollars to the economy.

"When the financial crisis started, most of thecountries resorted to expansion of financial space. As aresult, the deficit in Budget increased substantially and itgot reflected in the current account balance," he said.

Mukherjee said stimulus package helped India to grow by6.8 per cent in 2008-09 and by 8 per cent in 2009-10.

In fact, the process of fiscal consolidation began inthe current year itself as the government partially withdrewthe sops given to the industry in 2008 and 2009.

The expansionary policies to keep growth in tact, hadtheir impact on the country''s current account deficit, whichrepresents the difference in inflows and outflows of foreignexchange, barring capital movements. It is is projected to beat 3.5 per cent in the current fiscal, against 2.9 per cent inthe previous financial year.

The current account deficit above three per cent isconsidered to be a dampener for a national economy, accordingto experts.

Mukherjee had set a target of 4.8 per cent fiscaldeficit for 2011-12. It is expected he would try and stick tothis target in the coming budget.