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75 billion to finance the CAD. There are only three ways before us: FDI, FII or External Commercial Borrowing (ECB). That is why I have been at pains to state over and over again that India, at the present juncture, does not have the choice between welcoming and spurning foreign investment. If I may be frank, foreign investment is an imperative. What we can do is to encourage foreign investment that is consistent with our economic objectives.
12. Finally, the development must be sustainable – economically and ecologically. The development model must have democratic legitimacy and approval.
13. Looming large over our efforts to stimulate growth is inflation. Some inflation is imported. Supply demand mismatch, for example in oilseeds and pulses, also pushes up inflation. Aggregate demand is another cause of inflation. The battle against inflation must be fought on all fronts. Our efforts in the past few months have brought down headline WPI inflation to about 7.0 percent and core inflation to about 4.2 percent. It is food inflation that is worrying, and we shall take all possible steps to augment the supply side to meet the growing demand for food items.
14. Government expenditure boosts aggregate demand and it has both good and bad consequences. Wisdom lies in finding the correct level of government expenditure. In the budget for 2012-13, the estimate of Plan Expenditure was too ambitious and the estimate of non-Plan Expenditure was too conservative. Faced with a huge fiscal deficit, I had no choice but to rationalise expenditure. We took a dose of bitter medicine. It seems to be working. We also took some policy decisions that had been deferred for too long, corrected some prices, and undertook a review of certain tax policies. We have retrieved some economic space. As I outline our plans and priorities, Hon’ble Members will find that I have used that economic space to advantage – and to advance the UPA Government’s socio-economic objectives.
II. THE PLAN AND BUDGETARY ALLOCATIONS
15. The 12th Five Year Plan began in 2012-13. Anticipating a global and domestic recovery, total expenditure had been fixed at `14,90,925 crore. Due to the slowdown and the austerity measures, the revised estimate is `14,30,825 crore or 96 percent of the budget estimate. The economic space that we have gained has given