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The Finance Ministry intends to present a credible fiscal action plan within the next six weeks. This may encourage the Reserve Bank of India to cut the interest rate in the mid-quarter review of the monetary policy scheduled to take place on September 17, official sources said.
A highly-placed official source told Business Line , “The effort is to get the plan approved by the Cabinet. On one hand, the plan will focus on subsidy rationalisation, especially on petroleum products. On the other hand, focus will be on disinvestment for revenue mobilisation.”
He clarified that no cut in interest rate is expected before September 17.
“The effort is to first give a kind of confidence to the RBI that the Government is taking steps for fiscal correction. This may bring a change in RBI thinking on interest rate.”
The Government has asked a group consisting of Vijay Kelkar, Indira Rajaraman and Sanjiv Mishra to assist in formulating the path of fiscal consolidation. This group is expected to give a brief outline within a week and the final report within a month, the source added.
Subsidy revamp
Talking about the expenditure management, the source explained that price adjustment for diesel and LPG holds the key.
“Since such decisions have serious political repercussions, the Government may take Parliament into confidence before taking a tough stand. The Finance Minister may try to convince Parliament that if such decisions are not taken, fiscal conditions will deteriorate,” he said.
On the revenue front, hopes are being pinned on disinvestment.
“The thinking is to kick-start disinvestment in a big way even when the market price is low. This will give confidence to the market.” The process may start with big PSUs such as SAIL, ONGC, BHEL, NMDC and MMTC.
Increasing the quantum of shares to be offloaded or adding more companies in the list for disinvestment are also options that are being considered.
This will help in achieving the twin objectives of revenue mop-up and meeting the minimum public shareholding norms by June 2013. The Government has fixed a target of Rs 30,000 crore for disinvestment.
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