New Delhi: Prime Minister Manmohan Singh said on Sunday that the stimulus measures announced in the last fiscal to combat the economic slowdown would be wound down next year following recent signs of an upturn in the economy.
Singh made the announcement in his address to the India Economic Summit. It’s the first clear indication of a time frame for the winding down of the stimulus measures.
The Union government announced a fiscal stimulus package of Rs1.86 trillion while the Reserve Bank of India (RBI) provided potential liquidity of around Rs5 trillion, shielding the economy from the global financial crisis.
On 27 October, RBI signalled that it was exiting its loose monetary policy regime and turning its sights to dealing with higher inflation, estimated to reach 6.5% by the end of March.
Last week, finance minister Pranab Mukherjee said at the annual economic editors’ conference that the fiscal stimulus had not yet played itself out completely. “For the present, fiscal stimulus will have to continue to allow its impact to fully run through the economy,” he said.
The fiscal stimulus came in the form of both budgetary support for select sectors and cuts in indirect taxes such as Central excise and service tax.
The taxes that were reduced will be subsumed in the proposed goods and services tax, which Mukherjee hopes to roll out across the country in the next fiscal.