NEW DELHI, Feb 16 – India\’s ruling Congress party warned Monday that the fiscal deficit would have to rise sharply to counteract the impact of the global slump on the domestic economy in a pre-poll mini-budget.
The government, whose five-year mandate expires in May, said the economy had enjoyed a "dream run" for the past few years with growth running at an average close to nine percent — "much faster than ever before."
But acting finance minister Pranab Mukherjee said the downturn meant the fiscal deficit would be 6.0 percent of gross domestic product for this fiscal year to March 2009 — more than double the government\’s initial target of 2.5 percent.
"Expenditure may have to be increased substantially if we are to give the economy the stimulus it needs to cope with the global recession" that is likely to last throughout 2009, Mukherjee told parliament.
He estimated the fiscal deficit for coming financial year would be 5.5 percent of GDP.
The full budget for the financial year 2009-10 will be presented by the party which wins power and will not come until around July.
But the mini-budget, which seeks spending approval for the period until then, will form a basis of Congress\’s re-election campaign.