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Finance Secretary defends withdrawal of stimulus package | Commenting on the new Budget proposals, Finance Secretary Ashok Chawla said that the budget is pragmatic, balanced and realistic. He said, "The economy has been through difficult
times and it needed a booster dose in terms of higher public spending, which was
provided and has done its job. But, at the end of the day the medium term and
long term sustainability has to be built around fiscal prudence." Ashok Chawla
justified the need to reduce the deficit because it has a large number of undesirable
effects. Earlier on Friday, Mukherjee highlighted the key challenges facing the
Indian economy as he spoke in the Lok Sabha . Mukherjee announced plans to hike
spending on social and agricultural programmes popular among voters, and adjusted
taxes to put more money in the hands of the middle class. Mukherjee said the
government
plans to increase market borrowing by 1.3 percent in his $239 billion budget,
pushing bond prices lower as investors anticipated a flood of fresh debt supply.
Mukherjee also announced that the central bank is considering allotting new banking
licenses to private-sector companies and non-banking finance companies in order
to expand the reach of banking services to more areas. The Reserve Bank of India
said that it would come out with fresh guidelines for licensing of new banks.
Reserve Bank of India Deputy Governor Usha Thorat said, "What is being said that
there will be new licences, why, so far for the last five years, we have not really
given any new licenses." "What the Finance Minister has said is that there will
be considering new licenses, and there will be eligibility criteria. So, in all
that we will keep in view the basic principles," added Thorat. India 's apex bank
has been cautious of granting licenses to the private sector banks. The last banking
license was allotted to Yes Bank Limited in May 2004. Centre has planned record
levels of borrowing next year and will count on surging economic growth to help
cut its fiscal deficit. The fiscal deficit for 2010-11 has been pegged at 5.5
per cent down from 6.9 percent in the current fiscal. The government plans to
reduce it further to 4.8 percent in 2011-12 and 4.4 percent a year after that. |
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