Q: We don’t quite know whether the monsoon will or won’t play truant. We all hope it won’t but you sketched out the challenges the Finance Minister faces both in terms of domestic manufacturing sector and certainly in terms of our own agriculture side of the economy. In this situation given that we have a fiscal deficit that is said to be teetering very close to 8% for the center and may be 11.5% if you add in the states - does the Finance Minister have room for another stimulus and if so what sort of stimulus would you recommend - a fiscal one or something else?

A: The revised estimates for the total expenditure for the last year 2008-09 was nearly 20% higher than the budget estimate. That’s what we have provided or the government has provided an adequate fiscal stimulus. Even the interim budget projected another 6-7% increase in the total expenditure for the year 2009-10. Therefore in my opinion the fiscal stimulus that has been provided already is quite strong. We certainly need to look at not only the overall government expenditure but also the composition of government expenditure and the effectiveness of government expenditure. To some extent some sectors of the economy are more affected adversely than other sectors because of the global slowdown.

Therefore the composition of the government expenditure is as important as the overall level of government expenditure and I would hope that the Finance Minister addresses the composition of the government expenditure as well. Therefore there could be some additional stimulus but overall I would still think that we need to keep the fiscal deficit also in balance. The original projection in the interim budget for the fiscal deficit for 2009-10 is 5.5%. Subsequent to that he reduced the excise duties. Even the budget deficit has shown in the budgets would be about 6% of the GDP as far as the central government is concerned. But with some additional stimulus we could go upto 7% of the GDP. It is not that I recommend that we exceed the fiscal deficit by high margin but given the situation we probably could go upto 7% of the GDP.

Beyond that I think we should not go and keeping that as the overall limit we should plan the government expenditures.

Q: Which are the sections of government expenditure from you would withdraw funds and where would you add additional?

A: I am not even talking in terms of withdrawing. I am looking at the expenditure allocated to a particular department and within that as far as that particular department is concerned it could really redeploy the expenditures in such a way that some of those sectors of the economy that are affected badly could be fixed up. For example in the Jawaharlal Nehru Urban Renewal Mission recently we have allowed the purchase of buses also as part of the JNURM programme.

That’s a good idea because the automobile sector needs a fillip, needs stimulus and this can be provided by placing orders. Similarly the defense department also could do it in terms of looking at those sectors of the economy which require additional support and refashion the government expenditure. I am not really talking about reducing it somewhere and increasing it somewhere - even taking the allocation to each department whether each department can do the expenditure in such a way that the stimulus would go to help those sectors of the economy which are affected.

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