New Delhi: The economy may require another round of stimulus package in 2009 as it is unlikely to beat the downturn by that time, Planning Commission deputy chairman Montek Singh Ahluwalia said.
“Since global slowdown is not this year but will be will continue next year also, fiscal stance that needs to be considered should not be just for this fiscal but also for the next year,” Ahluwalia told reporters on the sidelines of a function held to mark the 75th birth anniversary of Nobel laureate Amartya Sen.
Ahluwalia said the plan panel is working on plan allocation estimates for the next fiscal. “In my view need for fiscal stimulus will not end this fiscal, it will go beyond that,” he added.
The government had cut across the board four per cent across the board excise duty recently, besides increasing planned expenditure as stimulus package to perk up the economy, hit by global slowdown and earlier rising interest rates regime.
On Thursday, the government sought parliamentary nod for additional around Rs42,000 crore for planned expenditure.
In the first supplementary, the government has already got Parliament approval for Rs1.05 lakh crore as the additional planned outlay.
Ahluwalia said, the most important thing is the package that has been presented gets implemented, and the expenditure provided in the budget is incurred.
He said the fiscal deficit will be much more than budgeted after the package.
“On the fiscal side, I think it was necessary to give the economy the stimulus it needs, we have made it clear fiscal deficit will be larger and government will report that to Parliament at appropriate time. That was the right thing to do. Nobody is saying that we should stick to fiscal deficit target,” he added.
As per the plan target it was aimed to lower the fiscal deficit to 2.5% of GDP, but has already touched 88% of till October.
Besides the first stimulus package, there is speculation for some more steps to boost demand in sectors like housing and auto.
On falling inflation, Ahluwalia said, “I have said it will come down, it has come down. It may come down even further.”
Inflation came down drastically to 6.84% for the week ended 6 December after a cut in petrol and diesel prices.
Analysts are expecting that inflation will come down further in a slow growth scenario. As such, now focus has shifted to boosting growth.
Ahluwalia said 7% growth this fiscal would be a good performance.
Economy expanded by 7.8% in the first half of this fiscal from 9.3% a year ago. However, analysts expect further slowdown in the growth in the second half.
Already, industrial output has contracted for the first time in 15 years by 0.4% in October, and this will affect the economic growth unless services expansion neutralise the negative growth in industrial production.