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Rains help growth to blossom

New Delhi, Aug. 7: Finance minister Jaswant Singh today claimed that good monsoon rains and an industrial revival could lead to “robust growth” this fiscal.

“The monsoon has progressed well with 86 per cent of the meteorological subdivisions receiving adequate rainfall by July 23. Latest forecasts predict 98 per cent of the long-period average rainfall,” the minister stated in a quarterly statement on the economy and budget placed in the Upper house of Parliament today.

“This should reverse the decline in agricultural output last year, leading to robust growth in this sector,” Singh said.

Developments in the first quarter of this year were encouraging, Singh said in his statement. “This year should witness significant growth coupled with macroeconomic stability.”

However, the statement admitted there were “pressure points” in the economy from mounting food and petroleum subsidy bills. “There are some pressure points largely on account of subsidies in food and some petroleum products,” Singh said.

Subsidies had registered a high growth of 62 per cent in the first quarter mainly due to the large outgo of Rs 1,680 crore on account of subsidies on kerosene and cooking gas, food sold through the nationwide rationing system and fertilisers.

The government has already run up a fiscal deficit of Rs 38,608 crore in the first quarter of this financial year. However, the high fiscal deficit this quarter was Rs 952 crore lower than that in the previous year.

A part of this deficit was because of the fact that revenue collections remain poor at Rs 25,041 crore, which is 16.2 per cent lower than last year’s first quarter revenues. Tax revenue collection has fallen even more sharply by 20 per cent at Rs 19,172 crore.

However, Singh said that “no slippage shall be permitted in bringing about improvements” in revenue collections and asserted that there had been an improvement in tax administration.

But not everyone is buying this statement. A wire agency quoted Kristin Lindow, vice-president of Moody’s Investors Service, as saying “we have concerns about how this success (better growth results and lower foreign debt) is overshadowed by the weak (and growing weaker) fiscal situation.”

Moody’s had upgraded India’s foreign currency debt ceiling in February by one notch to Ba1, the highest level of the speculative grade ratings scale, due to an improvement in the external liquidity position.

Singh’s review follows the passage of the Fiscal Responsibility and Budget Management Bill in Parliament recently, which makes it mandatory for the government to review trends in receipts and expenditure every quarter.

In his quarterly review, Singh said sectors like industry and services would benefit from the anticipated growth which could accrue because of the good rains. He pointed out that the index of industrial production (IIP) was up by 5 per cent in the first two months in the current year as compared with 4.1 per cent a year ago.

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