New Delhi: The fiscal stimulus measures announced since December are temporary and the government plans to return to fiscal prudence at the earliest, a junior finance minister said in a written reply to parliament on Friday.
Namo Narain Meena was responding to a lawmaker’s query on a recent central bank statement that flagged concerns over the government’s fiscal deficit, which is projected to rise to 6.8% of gross domestic product in FY10.
In its April annual statement, the Reserve Bank of India said it would be a “challenge” to unwind fiscal stimulus in an orderly way and return to a path of “credible” fiscal consolidation.
“The expansionary stance of fiscal policy is temporary and reversible. The government intends to return to fiscal discipline at the earliest,” Meena said.
India has cut tax rates and boosted spending since December to stimulate demand in its economy as the growth rate slowed to 6.7% last year, after three straight years of expansion of at least 9%.
The stimulus measures have widened the fiscal deficit to 6.8% of gross domestic product (GDP) for 2009/10, its highest level in 16 years, which has to be funded through a record borrowing of Rs4.51 trillion ($92.6 billion).
On Thursday, the government announced to frontload 66% of its full-year borrowing to make more credit available for private players in the second half of the year.
Meena said the budget for 2009/10 has mentioned that the fiscal steps were taken to sustain the growth momentum.
The government’s intent to bring down the deficit to 5.5% in 2010/11 and further to 4% in 2011/12, he added.
The economy is expected to grow 7% in the current fiscal ending March 2010, and policy makers say some of the stimulus spending could be tapered off after the recovery.