Bloomberg News

Basu Says India Will Get Close to 4.6% Fiscal Deficit Target

November 15, 2011

Nov. 15 (Bloomberg) -- Kaushik Basu, chief economic adviser to India’s finance ministry, comments on the fiscal deficit and inflation. Basu was speaking to reporters in Mumbai today.

“Questions can be raised on whether the Reserve Bank of India is moving faster than the ministry on curbing inflation. The fact is, both are moving in the same direction in cutting back to fiscal consolidation and mopping up demand.

‘‘This year we are after 4.6 percent deficit and it is a tough target. We want to go close to the deficit target and that’s the line we are taking.

‘‘There is no thinking as of now on revising the deficit target. You have to keep in mind that in industrialized countries there are discussions on going a little slow on fiscal consolidation because of a recessionary tendency all over.’’

On the Indian rupee’s decline:

‘‘The rupee’s fall does put pressure on us. There are two forces working behind it. One is that we have had inflation that is above that of U.S. for two years. So there is some loss of value in the exchange rate. The second side, on which we have absolutely no control, is that every time there is turbulence in Europe, money seems to flow into U.S. Treasuries because there is a feeling that you may not earn money but it is safe in Treasuries.

‘‘There is a feeling that the rupee’s decline is a fluctuation and not a trend. For a movement of the kind we have seen, what the Reserve Bank of India is doing is exactly right, which is to do nothing.’’

On European debt crisis:

‘‘I am very worried about Europe. We are concerned about a sudden crisis being sparked off. Countries like Italy and Spain don’t have their own central bank, which can print money to prevent a crisis temporarily.

‘‘I’d like to believe that a sudden crisis in Europe will not happen but we are very close to it. If it happens it will have an adverse impact on India.

--Editors: Nicholas Wadhams, Abhay Singh

INR@IN RBI@IN

To contact the reporter on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net

To contact the editor responsible for this story: Hari Govind at hgovind@bloomberg.net


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