NEW DELHI, Oct 5: Indian Finance Minister Yashwant Sinha said on Friday the government was ready to tackle any economic fallout from the deadly attacks on the United States but kept a tight lid on his plans.
Analysts say the global economic turmoil following the attacks and the prospects of retaliation by the United States against Afghanistan where the prime suspect is in hiding will have an impact on the already slowing Indian economy.
We’ve thought of the possible contingencies and our response will be ready if the contingencies arise, Sinha told reporters in his office. But these plans cannot be made public.
Sinha said his ministry would create the necessary conditions for softer interest rates by keeping a check on its yawning fiscal deficit and the government’s borrowing rate.
We’re doing everything to keep the fiscal deficit within the budgeted target (for 2001/02). It will be our effort to keep the fiscal deficit as close to the target, he said, adding the government would also seek to meet its revenue goals despite sagging receipts.
The government has consistently failed to meet the fiscal deficit target in the past and hopes to rein in the runaway deficit at 4.7 per cent of gross domestic product this year.
But he ruled out any cut in the government-administered small savings rates, saying he took a “bold step” by cutting rates on these schemes by 100 to 150 basis points in the February budget.
It is not on the cards at all, Sinha said.
The cuts sparked political furore as pensioners and the middle-classes rely on the smalls savings schemes for income.
He added it was up to the central Reserve Bank of India to take any decision on lowering the key bank rate. I’m sure the governor will take into account the overall economic situation when he announces the monetary policy later this month.
Indian markets are expecting the bank to ease rates in line with global trends and cut the trend-setting bank rate by at least 50 basis points from the current seven per cent.
Sinha said the government has already taken some steps to shore up sliding exports, likely to suffer in the months ahead as the United States is New Delhi’s biggest trading partner, accounting for more than 20 per cent of its shipments.
He said there was a chance of more steps to boost exports and measures to prop up capital markets could be announced soon.
Sinha dismissed domestic media reports the country’s largest mutual fund manager, the Unit Trust of India would be privatized.
That is not on our agenda at all, he said.
The cash-strapped fund froze redemptions in its flagship US-64 scheme in July after it suffered huge losses because of a stock market slump. The move freeze drew howls of protests from investors and caused uproar in parliament.
Later it partially eased the freeze on withdrawals and has not faced any redemption pressure on its flagship US-64 fund.
I don’t expect any redemption pressure in future. Since August the total redemption has been very small, Sinha said.—Reuters
