FM's growth mantra: Cut subsidies, deficit; divest more

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At a conference interacting with economic editors of various publications, Finance Minister Pranab Mukherjee re-iterated his stand that the government was looking to cut down on its burgeoning fiscal deficit, reduce subsidies to various oil and fertiliser companies and continue on its divestment path.

Mukherjee also spoke on the economy and said it was showing "distinct signs of pick-up". The fiscal stimulus packages that the government released at the height of the financial crisis late last year helped in moderating the slowdown, he said.

"The Indian economy may have weathered the worst of the downturn," the minister said. "We are seeing positive indications that growth will recover in FY10."

However, the increased government spending to counter the global financial tumult and strain on the exchequer in the form of reduced taxes have added to the fiscal deficit, which currently stands at 6.8% of the nation's gross domestic product (GDP).

'Will cut deficit, subsidy'

"We expect the fiscal deficit to come down to 5.5% in FY11 and 4% in FY12," Mukherjee said and said the country's external debt position was "within the comfortable zone". Additionally, he said the government was also looking to cut down on its expenses that are in the form of subsidy dole-outs to state-owned oil and fertiliser companies that sell products at a loss.

More divestment on cards

The FM said the government would also press on with its agenda of disinvesting in state-owned firms. "We are aiming at stake sales in public-sector undertakings (PSUs) that have less than 10% public holding," he said. "A few more PSUs have been identified for disinvestment."

The government has in the past few months divested stake in PSUs by listing them on the stock exchanges with NHPC and Oil India being a few.

'Keeping a close watch on economy'

Mukherjee said the Indian economy would see an effect of the drought in the coming quarters. On the issue of rising inflation, he said it was not yet a "pressing area of concern".

While some experts have called upon the government and the central bank to hike interest rates and reign in liquidity (that was introduced to stimulate growth), Mukherjee said that the government could not drop its guard due to global uncertainties. "The current economic situation warrants a close watch," he said.