HIGHLIGHTS-India finmin favours continuing fiscal stimulus

NEW DELHI, Nov 3 (Reuters) - India has to continue with its fiscal stimulus and is confident of attaining it medium-term fiscal targets, Finance Minister Pranab Mukherjee said on Tuesday.

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Following are excerpts from the finance minister's speech at the annual economic editors conference:

GROWTH:

"The recent months have witnessed some clear signs of a turnaround in the growth rate. There is no dearth of liquidity in the economy and inflation as yet is not a pressing area of concern."

"It seems that the two worst quarters since the global financial meltdown in September 2008 are behind us."

"After visible signs of pick-up in industrial growth in the last few months, there are some indications that growth of core industries may have moderated in September 2009. Some uncertainties related to the revival of the global economy also remain. We cannot therefore afford to drop our guard."

MONSOON AND ECONOMY:

"On the domestic front, the impact of the sub-normal Southwest monsoon is yet to be felt, though it is likely that we may fare better than the initial estimates of the decline in food production and agriculture GDP."

"The recent information on the non-farm credit off-take continues to be an area of concern. No doubt that credit off-take has been impacted to some extent by the vagaries of nature, but now an all-out effort is being made to ensure that credit off-take to the employment-generating sectors, especially agriculture, and micro and small enterprises, picks up."

"Banks have been asked to take advantage of upcoming busy season and enhance credit flows."

PUBLIC FINANCES AND STIMULUS

"While there are good reasons to believe that the immediate policy response to the global slowdown through a deliberate fiscal expansion may have been effective in moderating the decline in GDP growth, there are some concerns on the medium-erm prospects of the economy."

"Indeed, there is some anxiety about the sustainability of fiscal correction achieved since the institution of Fiscal Responsibility and Budget Management Act."

For the present I maintain that the fiscal stimulus will have to continue, to allow its impact to fully run through the economy. It is, however, an imperative to come back to the path of fiscal prudence, as soon as the current economic circumstances permit us to do so."

"Fiscal prudence is critical for maintaining a stable balance of payments, moderate interest rates and steady flow of external capital for corporate investment.