Grappling with the stressed economy, finance minister P Chidambaram said on Saturday “hard decisions” would be taken in the next few days and weeks to trim wasteful expenditure. “We are going through a period of stress... we have to take some hard decisions. All these measures will have beneficial impact,” he announced in the Rajya Sabha.
Chidambaram said, “When you are facing a gloomy situation, wasteful expenditure has to be curbed....You call it austerity measures, you can call it cut in non-plan expenditure...while we must continue to spend and continue to find money for productive investment.”
Stating that there was a need to curb all inessential imports, he said, “When you have the money, you can import anything and it does not make any difference to the economy. But when you are facing a stressful situation, you have to curb inessential imports.”
He stressed, “We allowed fiscal deficit target to breach. We allowed CAD to swell. I blame nobody. We include all of us in government, we include all in Parliament.” Chidambaram said stimulus packages to help the industry tide over the impact of the slowdown had its consequences on the fiscal deficit and the current account deficit.
On the declining rupee, Chidambaram said its rate was market determined and there was no question of going back to the pre-1991 days of fixed exchange rate. Observing that the value of rupee had improved in the past few days, Chidambaram said, “...I keep my fingers crossed. We are fighting many unknown factors in the currency markets...but measures are being taken to increase dollar inflow,” he said, welcoming the decision to raise currency swap arrangements to $50 billion.
Describing inflation as the worst form of taxation that hit the poorest the most, he said the government would be coming out with more measures to deal with the price situation.
Inflation, he said, had to be tackled by addressing the supply side constraints and removing distribution bottlenecks. “First step is to focus on supply side. Distribution side is antiquated... We have to focus on distribution system also,” he added.