Ahead of the Budget, the Prime Minister’s economic adviser C. Rangarajan on Tuesday made a strong case for withdrawal of stimulus given to the industry to combat the impact of the global economic meltdown, saying the growth impulses are strong.
“7.2 per cent growth rate (projected by CSO) for current fiscal indicates that growth impulses are strong. Process of fiscal consolidation must start and some steps can be taken in the Budget,” Mr. Rangarajan told PTI.
The forecast could have been higher this fiscal had there been a normal monsoon and no decline in farm sector output, which is estimated to contract by 0.2 per cent, he added.
Driven by high growth of 8.9 per cent in the manufacturing sector, the economic growth in the current fiscal is likely to be 7.2 per cent, the CSO said in its advance estimates for the national income released yesterday.
Buoyed by the growth projections, Planning Commission Deputy Chairman Montek Singh Ahluwalia too had pitched for withdrawal of concessions saying “we should say the stimulus has succeeded and we should begin to phase it down.”
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 — an increase of 0.6 from last year.