Green shoots taking root; Budget could be the harvest time

Green shoots taking root; Budget could be the harvest time
The Financial Express, December 24, 2009, Page 2

fe Bureaus, New Delhi

The government has begun laying the groundwork for withdrawing the fiscal stimulus measures extended to India Inc to weather global recession. Finance minister Pranab Mukherjee on Wednesday hinted that some of the sops are likely to be rolled back when he presents the Budget for 2010-11 in February.

“Green shoots (of recovery) are now firmly taking roots. The recent data confirms it,” finance minister Pranab Mukherjee acknowledged for the first time while addressing PHDCCI’s annual meeting. ‘You have to wait till the Budget’ to know when the government will withdraw the stimulus packages, Mukherjee told industry captains.

Emboldened by strong quarterly growth, the government last week projected a GDP growth of over 7.75% in 2009-10, higher than the RBI estimate of 6% and the Prime Minister’s Economic Advisory Council’s 6.5%.

The economy grew at 7.9% the July-October 2009, as compared to 6.1% in the previous quarter. It grew at 6.7% in 2008-09. The government has projected a 6.8% fiscal deficit for 2009-10. Mukherjee added a growth rate of 9-10%, ‘which we have dreamt for a very long period of time is now within our reach and we have to achieve it.’

Speaking at the same seminar, Planning Commission deputy chairman Montek Singh Ahluwalia said, “There is a good chance that we end up better than 7% this year and the growth would be around 8% next year and even better in 2011-12.”

“If that would be the rates of growth, we should be ready to see roll back of stimulus measures. The decision has to be made by the finance minister in the Budget. Stimulus should not be expected to continue forever,” Ahluwalia added.

The indications are now clear that the government is preparing itself to withdraw the fiscal stimulus, a process the Reserve Bank of India had already started for the monetary expansion by raising the statutory liquidity ratio in October.