| Finance Minister Jaswant Singh with RBI governor Bimal Jalan in New Delhi on Saturday. (PTI)
New Delhi, March 15: Brushing aside criticism that the budget was not growth-oriented, finance minister Jaswant Singh today said the focus on infrastructure and certain other sectors will provide ‘quick returns’ for higher GDP growth and employment.
“The budget focussed on the sectors like infrastructure, textiles, tourism, pharma and other knowledge-based sectors as it would provide quick returns for growth of the economy and employment,” he said at the customary post-budget meeting with the Reserve Bank board here.
The finance minister hopes that a growth surge in these key sectors could set off a chain reaction taking the GDP growth forward. Huge packages of tax sops have been given to these sectors with calculations that these could expand fast. Though critics argue that a war in the region could see at least two suffering — textiles and tourism.
“We discussed the economy and the budget. The (growth) figures will come by as the year progresses,” Singh told reporters after the meet.
The budget figures have been calculated keeping GDP growth at 6 per cent during 2003-04, but many fear that this may be difficult to achieve as a war could lead to a global economic downswing.
The traditional post-budget meeting is an occasion for the finance ministry and the RBI to interact and chalk out new monetary strategies in the light of the budget.
Singh admitted there were budgetary constraints in view of the fiscal deficit of 5.6 per cent of GDP targeted during 2003-04. He also emphasised the need for private-public partnership in infrastructure which by leveraging a Rs 2,000 crore central investment could catalyse private investment in this sector.
At the meeting, RBI governor Bimal Jalan said the budget provided the necessary impetus to growth backed by strong fundamentals. However, Jalan said there was a need to improve efficiency to ensure higher GDP growth. Jalan did not comment on the course that interest rates could take. “As of now, interest rates are soft,” he said.
Jalan said that the low inflation rate and high forex reserves of nearly $ 74 billion indicated that the potential for economic growth was high. The budget will contribute to it,” he added.
The RBI governor declined to give any projection for the rate of growth but said, “We will revise it in the April credit policy.” The RBI had projected a 5-5.5 per cent growth in GDP for this fiscal as against the CSO estimate of 4.4 per cent.
Jalan told newspersons later that the central bank has made some suggestions on macro economic management, monetary management and on the fiscal side to the government at today's meeting. He said the finance minister would consider these in the course of the year.
Singh, while referring to 'rigidities' in expenditure due to high debt repayment, defence and subsidies, said the government has given greater attention to reduce interest payment through prepayment of costly external debt, restructuring of state debt and restructuring of financial institutions. He added the government adopted 90 per cent of the suggestions made by the Kelkar task force on improving tax administration. “Tax revenues must be mobilised in a green channel system based on trust rather than mistrust,” he added.