Contain fiscal deficit to end woes: Montek
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Planning Commission Deputy Chairman Montek Singh Ahluwalia today said problems of the industry, reeling under high interest rate regime, are linked to fiscal deficit that needs to be contained.
"I am willing to accept that high interest rates are a burden, but it is not going to be solved having interest subvention for this or that sector. It will be solved by bringing fiscal deficit down so that the government does not absorb all the money," Ahluwalia said at a FICCI event .
If fiscal deficit is contained, he said it "is going to benefit everybody. It will lower the interest rate genuinely".
The government has proposed to bring down fiscal deficit to 5.1 per cent of gross domestic product (GDP) in the current financial year.
It is estimated to touch 5.9 per cent of GDP against the targeted 4.6 per cent in 2011-12.
Fiscal deficit is the gap between government's total expenditure and income minus borrowings. In a situation when fiscal deficit rises, the government has to borrow more in order to meet its spending requirement. High government borrowings crowd out credit for the private sector.
Amid high interest rate regime, Index of Industrial Production growth during the April-January 2011-12 slowed to 4 per cent as against 8.3 per cent in year ago period.
On subsidy for food processing industry, Ahluwalia was of the view that it should be given to small players who are first generation entrepreneurs.