The Union Finance Minister, Pranab Mukherjee, on Friday remained non-committal on whether an interest rate cut was imminent. He also allayed fears that larger government borrowing this fiscal would leave lesser resources for the private sector.
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Not predictable
"These exercises are done constantly. You cannot just expect an omnibus reply. As and when situation will require, appropriate action will be taken. What appropriate action and what point of time is not predictable," Mukherjee told presspersons after a post-budget meeting with the RBI’s central board of directors.
The Finance Minister was responding to a question on whether he saw room for interest rates to go down further. He pointed out that the RBI had taken various steps as and when the situation demanded, throughout the global financial crisis period.
FURTHER REASONING
Meanwhile, erratic monsoons are beginning to worry the Centre as well as the RBI. Monsoons are deficient in North-West India.
On Government borrowing, Mukherjee said that he would, in his reply to the debate on the Budget, provide further reasoning for higher Government borrowing this fiscal. The Finance Minister’s reply is likely on Monday.
Budget 2009-10 had pegged Government borrowing for this fiscal at Rs 4.51 lakh crore, which is about Rs 89,000 crore higher than the level projected at the time of the interim Budget.
The Finance Minister highlighted that he had chosen to bring back the economy on a path of higher growth trajectory. "Private investment cannot be expected to meet the full requirement. That’s why it was decided to step up public expenditure and it had to be depended heavily on larger borrowing," Mukherjee said.
NO CROWDING OUT
The Finance Minister also reassured that the private sector will not be crowded out from the market on account of higher Government borrowing this fiscal.
"There should not be any apprehension that the private sector would be crowded out. The requirements of the private sector will be met from the market and the Government’s borrowing will be managed in such a manner that there is no disruption in the market in favour of the Government," he said.
NO CONTRADICTION
Mukherjee made it clear that there was no inherent contradiction between the monetary policy adopted by the RBI and the fiscal policy of the Central Government. "We (the Centre and RBI) are working in close cooperation. We have done that in the worst period of the present international financial crisis".
The Finance Minister also appreciated the manner in which the RBI had managed the Government borrowing programme for 2008-09. "You know that the level of borrowing was substantial (about Rs 3 lakh crore). The RBI did that without disrupting the market," he said.
