Ahead of the Budget, Prime Minister’s Economic Advisory Council (PMEAC) on Friday made a case for a partial roll back of stimulus by way of raising excise duties and reducing expenditure — which would automatically help reduce the fiscal deficit.

“There is a case for adjustment of duties... adjustments are possible both on the revenue side and the expenditure side in order to bring down fiscal deficit,” PMEAC Chairman C. Rangarajan told reporters after releasing the Review of the Economy 2009-10.

The Review said the economy would grow by over 7.2 per cent during the current fiscal and exceed 8 per cent in the next.

PMEAC member Govinda Rao said, “Partially, we need to roll back and if you partially roll back, you need to unify (excise duty and service tax rates).”

A uniform excise and service tax rates would imply rising of excise duty to 10 per cent. It is also possible that both rates may be raised to 12 per cent.

“There is one possibility that you unify both the rates at 10 per cent. There is another possibility... that both be raised to 12 per cent,” Mr. Rao said.

As part of the stimulus package given to the industry to combat the impact of the global financial crisis, the government, reduced the excise duty from 14 per cent to 8 per cent and service tax from 12 per cent to 10 per cent.

Mr. Rao, however, clarified that he is not making any suggestion to Finance Minister Pranab Mukherjee and it was up to him to take a call in the Budget.

Highlights

Following are the highlights of the Economic Review for 2009-10 prepared by the Prime Minister's Economic Advisory Council:

* Economy to expand by over 7.2% in 2009-10

* GDP to grow 8.2% in 2010-11, 9% in 2011-12

* Farm sector output much better than expected earlier

* Industrial growth to rebound in Q3 and Q4 of FY'10

* Food inflation may spill to other sectors in 2010-11

* Large fiscal deficit unsustainable

* Fiscal deficit needs to come down by 1-1.5% in 2010-11

* Reduce expenditure-GDP ratio by 1 per cent

* Expand service tax coverage; unify rate with CENVAT

* Scale up nuclear power generation

* Exports projected at USD 168.7 billion in 2009-10

* Imports seen at USD 296.8 billion in current fiscal

See related media for the full text of the Review of the Economy 2009-10

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