‘Deficit no problem for higher growth’

The fiscal deficit of about 5 per cent will not pose any problems for the higher growth path of the Indian economy even though it could be a...

The fiscal deficit of about 5 per cent will not pose any problems for the higher growth path of the Indian economy even though it could be an impediment, RBI Governor Y.V. Reddy said on Tuesday.

‘‘It is not a problem. It is an impediment for higher growth rate’’ Reddy said after attending the joint annual session of the World Bank and the International Monetary Fund here.

‘Actions don’t match words’

DUBAI: STRESSING that actions have not matched commitments, the World Bank president James D. Wolfensohn asked the developed world to live up to their word to meet the millennium development goals including cutting global poverty in half by 2015. Wolfensohn called on both rich and poor governments to fulfil their responsibilities and help bring an equitable global economic system. PTI

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Reddy said the debt in India should be seen in the context of its medium-term implications and not short-term and indicated that the external debt were mostly of a long gestation period. ‘‘In many of the countries where high fiscal deficit is posing a problem, it is mainly due to the high component factor of the foreign exchange in their debt while in India it was not the case,’’ he said.

In India the passage of the fiscal responsibility and budget management bill is intended to rein in deficit, he said, adding the fiscal deficit should also be seen in the context of the domestic saving rate.

Reddy added India was committed to multilateralism but it has to be done in such a way as to take care of the important trade issues. He disagreed that the $86 billion forex reserves will pose a problem. ‘‘The scope for exchange rate flexibility particularly in view of the build up of reserves of many countries has generated interesting debate and warrants an analytical approach from several perspectives,’’ Reddy added. PTI