The Hindu Business Line : Govt will not crowd out corporate borrowing

All ears: The Union Finance Minister, Mr Pranab Mukherjee, addressing captains of industry at a post-Budget interaction in the Capital on Tuesday. —

Our Bureau

New Delhi, July 7 The Finance Minister, Mr Pranab Mukherjee, has assured the private sector that the proposed higher Government borrowing for 2009-10 would be planned in such a manner that it would not crowd out corporate borrowing.

Budget 2009-10 has projected a gross Government borrowing of Rs 4.51 lakh crore for the current fiscal, about Rs 89,000 crore more than what was forecast in the Interim Budget. This had raised concerns that the step-up in Government borrowing to fund increased spend on social programmes could raise interest rates in the economy and thereby raise the cost of borrowing for the private sector.

“We will plan our borrowing in such a way that the private sector does not suffer from that (huge increase in Government borrowing). The intention is not to crowd out the private sector from the market,” Mr Mukherjee told industry captains at a post-Budget meeting here today.

Micro details

On the issue of disinvestment roadmap not finding any specific mention in the Budget speech, Mr Mukherjee said, “Budget is not the platform to set forth micro details and minute aspects of the disinvestment roadmap.

Disinvestment roadmap should come only after good deal of discussions with all the stakeholders. I had made my intentions clear in my Budget speech and highlighted that people participation in PSUs will be encouraged,” he noted.

The Finance Minister also admitted that high fiscal deficit was a problem and that the Government would make earnest effort to cut fiscal deficit (as a percentage of GDP) to 5.5 per cent in 2010-11 and 4 per cent in 2011-12.

He said that it was a conscious decision of the Government to go for a big hike in Plan outlay in this year’s Budget even if it involved risking a higher fiscal deficit. “I had no option but to heavily depend on borrowed resources.”

The Finance Secretary, Mr Ashok Chawla, told Business Line that the debt management committee of Finance Ministry and the RBI would meet on July 17 to “fine-tune” the already declared calendar of Government borrowing for the first half of the current fiscal. “We will also plan for the second half.” He also highlighted that the RBI would conduct open market operations and nearly 50 per cent of the projected gross borrowing could be achieved through RBI support.