With the Indian industry already having received three stimulus packages in the past few months,the government today said its fiscal space is now limited. It,however,added that there was always room for policy and procedural changes needed by corporates. So far as the government is concerned,its fiscal space is limited…but there is still room for policy and procedural changes and for removal of constraints in the way of corporate sector, Cabinet secretary K M Chandrasekhar said at the annual session of the Confederation of Indian Industries here today.
Chandrasekhar also said that government finances were already strained and any increase in borrowings would put pressure on interest rates. More borrowing will mean crowding out borrowing by the private sector and will have adverse impact on interest rates, he said.
Just yesterday,Reserve Bank governor D Subbarao had said that more borrowings by the government would have an adverse impact on interest rates. Subbarao had also warned that another stimulus would have a cost to bear and put pressure on credit markets. Asked whether the focus would now be on the RBI to provide stimulus,Chandrasekhar said it is for the central bank to comment upon.
Citing a turnaround in various sectors in the past two months,the Cabinet secretary said India would beat the International Monetary Fund (IMF) projection of 5.1 per cent growth in 2009. Overall we are beginning to see some hopeful signs… in a number of sectors we have seen some changes… cement,steel,capital goods… I dont think 5.1 per cent is what we are going to achieve, Chandrasekhar said.