By IANS,
New Delhi : India’s fiscal deficit will be much higher than anticipated this fiscal, Planning Commission Deputy Chairman Montek Singh Ahluwalia said here Sunday.
“The fiscal deficit will be higher than what was expected to be… we don’t have the numbers as of now though, they will come once they are calculated again,” Ahluwalia told reporters.
He, however, noted that the Indian economy is in a better shape than many countries.
Dwelling on the Rs.3,000-billion fiscal stimulus announced by Prime Minister Manmohan Singh Sunday, Ahluwalia said: “The stimulus package has been announced to minimize the effect of the global slowdown on the Indian economy.”
“Significant steps have also been taken for boosting the housing sector,” he said.
The Reserve Bank of India (RBI) Saturday announced it would shortly put in place a refinance facility of Rs.40 billion (Rs.4,000 crore) for the National Housing Bank, the state-owned principal agency to promote housing finance institutions.
RBI also said that in addition, one of the areas where plan expenditure can be increased relatively easily is the Indira Awas Yojana, a government-sponsored initiative to promote rural housing for people living below the poverty line.
As a further measure of support for this sector, state-run banks will soon announce a package for borrowers of home loans in two categories: up to Rs.500,000 and between Rs.500,000 and Rs.2 million.
Ahluwalia said the monetary steps have sent a message to banks that they need to lower the interest rates. “The message has already gone. It may take some time for the system to respond but the rates will come down.”
According to him, the government was looking at additional spending in core sector and would try to spend what has already been budgeted.
“We are also taking steps to ensure bank lending to industry,” he added, and added that a ‘supportive environment’ was needed for core sector financing.
“We expect the companies to pass on the benefit of tax cut to the consumers. However, the market forces will ensure the companies pass on the benefits of tax cuts to the consumers,” Ahluwalia said.
“Today, the major concern of the infrastructure sector is financing, the government is trying to extend financial support to the infrastructure projects through financing,” he said.
“Indian infrastructure finance companies are being given permission to mobilize up to Rs.10,000 crore (Rs.100 billion) through tax-free bonds. This amount will be used to fund infrastructure projects,” he said.
According to Finance Secretary Arun Ramanathan, the impact of the four percent cut in central VAT would be Rs.8,700 crore (Rs.87 billion/$1.75 billion).
In addition, the government will also seek parliament’s approval for plan expenditure of another Rs.20,000 crore (Rs.200 billion/$4 billion) in the remaining four months of the fiscal.
A slowdown in tax receipts and the measures unveiled Sunday are also expected to impact on the fiscal deficit, which was budgeted at 2.5 percent of gross domestic product for 2008-09 – 30 basis points lower than the 2.8 percent in the previous year.