Expecting the country’s growth rate to strengthen further in the coming months, finance minister Pranab Mukherjee on Tuesday said the government would gradually withdraw fiscal stimulus measures undertaken since October 2008 to combat the adverse impact of global economic crisis.
“It is our intention to have a gradual and sequential exit from stimulus, keeping in focus long-term fiscal sustainability concerns. The process of fiscal consolidation is accordingly calibrated to be supportive of growth in the medium-term,” Mukherjee said at the Economic Editors’ Conference.
“There is a need to limit growth in expenditure so as to achieve a lower-than-budgeted level of fiscal deficit,” he said. In the Budget for 2010-11, the government started exiting from stimulus measures, by raising excise duty by 2% to 10%.
It began withdrawing stimulus measures to bring down fiscal deficit which has crossed 6% in 2008-09, double of what was mandated by the Fiscal Responsibility and Budget Management Act. In 2009-10, fiscal deficit widened further to over 6.5%, but is now pegged at 5.5% of GDP this fiscal.
The next round of stimulus exit is expected to coincide with introduction of the Goods and Services Tax (GST) in the next fiscal. The government had earlier reduced the service tax rate by 2% to 10%. A momentum in GST would be made, Mukherjee said.