Allaying apprehensions over the Centre’s timing of exiting the stimulus mode in the wake of the RBI’s toughening monetary stance, Finance Minister Pranab Mukherjee on Friday clearly hinted that the withdrawal of fiscal packages might not come before the end of 2009-10 as he would take a call on the policy issue only after scrutinising the growth numbers of the second and the third quarters.
Speaking at the ‘Hindustan Times Leadership Summit’ here, Mr. Mukherjee revealed that he would share his perception on exit strategy at the G-20 Finance Ministers’ meeting in Scotland starting November 6 while noting that the government expected a pick-up in GDP (gross domestic product) growth in the next two years.
“So far [as] we are concerned, I think I shall have to watch [the] situation for the progress [in economic growth] in the second quarter and third quarter. Perhaps, I may be in a position — I am not asserting that position — to articulate it [exit strategy], sometime when the D-day will come… Next week, I am going to share my perception what should be the exit policy in G-20 Finance Ministers meeting in Scotland, just next Saturday,” he said.
Ruminating over the issue, Mr. Mukherjee felt that instead of a blanket exit strategy for all nations, each country should work out its own plans depending on the economic situation at home. “We are strongly advocating that at different points of time, the crisis was held by the country concerned, and they know where the shoe pinches, therefore instead of having any blanket exit strategy all over the world, let the states make an assessment in the context of the situation prevailing at that point of time and take appropriate decision,” he said.
With the GDP growth figures for the second quarter expected by November-end and that of the third quarter by the end of February next year, it is evident that the exit strategy may be announced sometime in March or even later during the next fiscal. A broad indication of the Centre’s mind on timing the exit will largely depend on implementation of the proposed Goods and Services Tax (GST) slated for introduction from April 1, 2010. However, going by the progress in this regard relating to fixation of the rates of indirect taxes, Mr. Mukherjee admitted that he would not be surprised if the new tax regime is delayed by a few months.
In a more optimistic note, the Finance Minister pointed out that he expected the economy to get back on the high growth path of close to nine per cent in the next two years from the current fiscal’s projection of 6.5 per cent.
Besides, for returning to the high growth track, a broad political consensus on crucial legislations, including the labour and the insurance bills, would be required to push forward the reforms, he said. Stressing on the need for fiscal consolidation, he said the target must be to “bring back fiscal deficit within prudent limits.”