March 30, 2009 4:45:03 pm
Pressure to support India’s economy and drive growth during the global economic and financial crisis could impede efforts to put its fiscal house in order,a report by the government and RBI said on Monday.
“Given the current pressures to maintain growth at a reasonably high level it would not be possible to resume the fiscal correction path after the current financial turmoil,” the report on the country’s financial sector said.
The report said that once the current turmoil had passed,fiscal discipline needed to be reasserted to support growth.
“For the growth momentum to be sustained,it is necessary to return to the path of fiscal prudence at both the central and state governments,” the report said. The federal government’s finances have suffered in the 2008/09 fiscal year that ends on March 31,after making solid gains over the past few years,as a slowing economy has hit revenues and increased spending.
The government expects the deficit to widen to 6 per cent of gross domestic product in 2008/09,more than double its initial estimate. Analysts say the country’s combined deficit,including state deficits and off-budget items such as fuel subsidy costs,is around 10 per cent.
The six-volume report is a comprehensive review of the country’s financial system. The committee that prepared it was formed by the government and central bank in 2006,and was headed by Reserve Bank of India Deputy Governor Rakesh Mohan.
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