New Delhi: Concerned over the possibility of withdrawal of stimulus packages in the upcoming budget, industry leaders have urged finance minister Pranab Mukherjee not to raise excise or service tax till the economic growth rate reaches pre-crisis level of 9%.
“We are afraid that roll-back of stimulus packages, even partially, could derail the growth process and adversely impact the industrial sector,” Ficci President Hash Pati Singhania said.
“The stimulus packages should continue for another year or at least till 31 October,” he said, pointing out that the economy is yet to achieve the pre-crisis level of 9%.
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 26 February.
As part of the stimulus, the government reduced the excise duty in two tranches from 14% to 8% and service tax from 12% to 10%.
CII director general Chandrajit Banerjee too, while responding to queries 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 president 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% in the last fiscal after growing at 9% in the three preceding years.
In the first quarter of the current fiscal, India registered an economic growth of 6.1%.
However, beating expectation of analysts, Indian economy grew by 7.9% 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 Rs1.86 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% of the GDP from 6.2% a year ago.