Concerned over the possibility of withdrawal of stimulus packages in the upcoming budget, India Inc has urged Finance Minister Pranab Mukherjee not to raise excise or service tax till the economic growth rate reaches pre-crisis level of nine per cent.
“We are afraid that rollback of stimulus packages, even partially, could derail the growth process and adversely impact the industrial sector,” FICCI president Harsh Pati Singhania told PTI.
The stimulus packages should continue for another year or at least till October 31, he said, pointing out that the economy is yet to achieve the pre-crisis level of nine per cent.
The Finance Ministry is believed to be considering partial withdrawal of stimulus given to the industry to combat the impact of the global financial crisis triggered by the fall of financial services firm Lehman Brothers in September 2008.
The budget is slated to be presented on February 26. As part of the stimulus, the government reduced the excise duty in two tranches from 14 per cent to 8 per cent and service tax from 12 per cent to 10 per cent.
CII Director General Chandrajit Banerjee too, while responding to queries send by the PTI on withdrawal of stimulus said, “The very fact that we have had the worst financial crisis since 1929, involving the entire globe, reflects that recovery will be slow and enduring, with ample risk of double dip recession on the way.”
Making a case for continuance of stimulus, Banerjee said, “Uncertainty would persist with regards to the sustainability of growth once the effects of large government spending at the time of the crisis play out completely.”
According to PHDCCI -resident Ashok Kajaria, the government’s policy should take care of economic growth and its sustainability.
“It is more important that the government’s policy framework takes care of economic fundamentals and sustain growth momentum,” he said.
Impacted by the global financial crisis, India’s economic growth declined to 6.7 per cent in the last fiscal after growing at 9 per cent in the three preceding years.
In the first quarter of the current fiscal, India registered an economic growth of 6.1 per cent.
However, beating expectation of analysts, Indian economy grew by 7.9 per cent in the second quarter of this fiscal, mainly driven by stimulus packages.
In order to help the industry tide over the impact of the global financial crisis, the government came up with three stimulus packages sacrificing Rs 1.86 lakh crore in revenue.
The stimulus packages, which included tax cuts and raising public expenditure, are estimated to push the fiscal deficit to 6.8 per cent of the GDP from 6.2 per cent a year ago.