FM assures of phased booster exit
The Economic Times, November 17, 2009, Page 9
Our Bureau NEW DELHI
STIMULUS packages to perk up the economy during the slowdown are unlikely to be withdrawn in the current financial year and the exit, when it happens, will be a gradual one, finance minister Pranab Mukherjee said on Monday.
The recovery has mounted pressure on the government to clear its stand on the fiscal stimulus, as the country needs to quickly get back to the path of fiscal consolidation. “Stimulus will be removed when economy is firmly on the path of recovery. The common man had been cushioned against the global slowdown by the government regulation,” Mr Mukherjee said at a CII conference on competition policy.
India had announced three stimulus packages between December 2008 and February 2009 that included tax cuts and borrowings-financed additional government expenditure to create local demand to counter recession in advanced economies. It had reduced the cenvat rate or the tax on factory output from 16% to 8% in stages beginning Budget 2008-09 to stimulate demand. The government is budgeted to borrow over Rs 4 lakh crore to finance extra expenditure, taking the fiscal deficit to a 16-year high of 6.8% in 2009-10.
Last week, Mr Mukherjee had said, in London, that the stimulus packages have achieved their objective. The signs of revival are evident. One of the key macro indicators, the industrial production, expanded by 9.1% in September 2009.
Cabinet secretary KM Chandrasekhar also echoed the views expressed by the finance minister. “The general indication is that stimulus will continue this year, that is the indications given by everybody. Let us not think stimulus is something that will be withdrawn all at once,” he said. Mr Chandrasekhar added that certain elements in stimulus packages might be retained while others might go, but declined to reveal the details.
Policymakers fear the government’s high borrowing could crowd out private fund raising when the demand for funds picks up. The growth in non-food credit has been less than 5% in the current fiscal. Once the economy gathers momentum, credit off take will pick up.
The Economic Times, November 17, 2009, Page 9
Our Bureau NEW DELHI
STIMULUS packages to perk up the economy during the slowdown are unlikely to be withdrawn in the current financial year and the exit, when it happens, will be a gradual one, finance minister Pranab Mukherjee said on Monday.
The recovery has mounted pressure on the government to clear its stand on the fiscal stimulus, as the country needs to quickly get back to the path of fiscal consolidation. “Stimulus will be removed when economy is firmly on the path of recovery. The common man had been cushioned against the global slowdown by the government regulation,” Mr Mukherjee said at a CII conference on competition policy.
India had announced three stimulus packages between December 2008 and February 2009 that included tax cuts and borrowings-financed additional government expenditure to create local demand to counter recession in advanced economies. It had reduced the cenvat rate or the tax on factory output from 16% to 8% in stages beginning Budget 2008-09 to stimulate demand. The government is budgeted to borrow over Rs 4 lakh crore to finance extra expenditure, taking the fiscal deficit to a 16-year high of 6.8% in 2009-10.
Last week, Mr Mukherjee had said, in London, that the stimulus packages have achieved their objective. The signs of revival are evident. One of the key macro indicators, the industrial production, expanded by 9.1% in September 2009.
Cabinet secretary KM Chandrasekhar also echoed the views expressed by the finance minister. “The general indication is that stimulus will continue this year, that is the indications given by everybody. Let us not think stimulus is something that will be withdrawn all at once,” he said. Mr Chandrasekhar added that certain elements in stimulus packages might be retained while others might go, but declined to reveal the details.
Policymakers fear the government’s high borrowing could crowd out private fund raising when the demand for funds picks up. The growth in non-food credit has been less than 5% in the current fiscal. Once the economy gathers momentum, credit off take will pick up.
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