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Govt may peg fiscal deficit at 5 pc to battle slowdown

Trying to fight global slowdown and gearing up for the forthcoming elections...

Written by Press Trust Of India | New Delhi | Published: February 16, 2009 12:35:43 am

Trying to fight global slowdown and gearing up for the forthcoming elections,the UPA government’s interim Budget is likely to step up expenditure on its flagship programmes,rural development and housing,doubling the fiscal deficit to 5 per cent during 2009-10.

The interim Budget,to be presented by External Affairs Minister Pranab Mukherjee who is currently holding the charge of Finance Ministry,is also likely to announce short-term measures for exporters reeling under the impact of a global slowdown.

The government in the last Budget has fixed the fiscal deficit for the current fiscal at 2.5 per cent of GDP,which is likely to be raised to 5 per cent for the next fiscal,primarily on account of higher allocations towards the government’s flagship schemes like the Bharat Nirman and the National Rural Employment Guarantee Scheme.

To provide focus on urban infrastructure,the government may expand the ambit of the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) to include more districts. At present,the scheme is operational in about 60 mission cities.

The other focus of the Budget is likely to be on rural development which may witness allocations going up to more than Rs 55,000 crore from Rs 39,000 crore,an increase of over 40 per cent. With the government announcing two stimulus packages and revenues not forthcoming due to slowdown,the fiscal deficit has already crossed four per cent till December and may be revised to over six per cent of GDP for this fiscal,going by the indications.

The interim Budget may also provide a token allocation of Rs 100 crore for kick starting the Unique Identification (UID) scheme to provide a specific number to every citizen. In addition,the infrastructure finance company IIFCL may be authorised to raise money through tax-free bonds,while three state-owned banks — Central Bank of India,Uco Bank and Vijaya Bank — are likely get fresh funds.

According to indications,IIFCL could be allowed to raise around Rs 30,000 crore of tax-free bonds,the three PSU banks would get additional capital of Rs 2,150 from the government. The allocations for the agriculture,textile and tourism are likely to be retained at the current levels.

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