India’s subsidy bill to be below 2 per cent of GDP in 2012-13: FM

The government is committed to bringing down the subsidy bill below 2 per cent of the country's gross domestic product in 2012-13 and to 1.75 per cent of GDP in the next three years, finance minister Pranab Mukherjee said today.

He was making introductory remarks before addressing a press conference on the sidelines of the annual meeting of the Asian Development Bank in Manila, the Philippine.

At the same time, the finance minister said a policy reversal by the Reserve Bank of India (RBI) would revive investment climate and strengthen business sentiment in the country.
 
The RBI, in its monetary policy announcement on 17 April 2012, reversed the policy rates for the first time, after a gap of nearly three years.

He said, the Indian economy has been hit hard by the euro zone crisis through lower growth, falling business sentiment, declining capital inflows, exchange rate shock and stock market volatility with the attendant implication for investor confidence. Despite these challenges, India has managed to maintain a growth rate of 6.9 per cent in 2011-12, which underlines the resilience of the Indian economy, he noted.

Steps are being taken to meet the fiscal deficit. He said the focus of the union budget 2012-13 is on strengthening domestic growth drivers, encouraging private investments to regain its pre-2008 crisis growth momentum and addressing supply constraints in infrastructure and agriculture sector.

Combined with this, the monetary policy reversal by the monetary authority is expected to help revive investment and contribute to strengthening of business sentiment, he said.

He said the government has taken several steps to shore up short and medium term growth prospects, which include gradual liberalisation of capital market and encouraging capital inflows, including through FIIs, FDI and in the area of external commercial borrowings, especially for infrastructure financing.

The strong fundamentals of the economy will help India return to a sustained growth path of pre-2008 crisis level in the coming years, he added.