Too much of stimulus is injurious, says Chawla

Too much of stimulus is injurious, says Chawla
The Times of India, January 7, 2010, Page 23

NEW DELHI: A day after industry representatives met FM Pranab Mukherjee and sought the stimulus in the form of various tax sops to continue for another six months, finance secretary Ashok Chawla said too much of it could be injurious (to the industry) when the economy is on a revival mode.

"Too much of stimulus, when the body is getting healthy, is not good, it can be injurious to health," the finance secretary told reporters. Chawla's remark could mean a gradual withdrawal of many fiscal and monetary concessions the government had given early last year to infuse extra liquidity in the system other than the duty cuts to industry to make them more competitive.

Last year, after the global slowdown hit India, the government had introduced a host of stimulus measures including excise duty cuts by 6%, service tax reduction by 2% and enhanced expenditure in social and infrastructure sectors, besides agriculture loan waiver to the tune of Rs 65,000 crore and implementation of the sixth pay commission recommendations.

The fiscal and monetary sops introduced by both the RBI and the government led to the economy bouncing back with growth in the second quarter of 2009-10 standing at 7.9% against 6.1% in the first quarter and 5.8% each in the preceding two quarters.

The finance secretary also said that the government is through with the consultation process on the proposed direct tax code and a draft would be finalised very soon.

"The process of consultation is almost complete," Chawla said, adding that the revenue department is in the process of preparing a final draft of the proposed tax code that would replace the existing Income Tax Act of 1961.

After the draft is finalised, the tax code would be sent to the law ministry for vetting after which it will come up before the inter-ministerial committee. The direct tax code is proposed to be implemented from 2011-12.