23 December,2009 02:43 PM IST | | PTI
The government today said the fiscal stimulus given to the industry to combat the adverse impact of the global financial meltdown will not be withdrawn before the budget to be presented by Finance Minister Pranab Mukherjee in February.
"You have to wait till the Budget," the finance minister said, replying to a question, when the government proposes to withdraw the stimulus packages.
After the collapse of Lehman Brothers in September 2008 which triggered the global financial crisis, the government had provided three stimulus packages to spur growth in a slowing down economy.
These were in tandem with the measures taken by the Reserve Bank of India to make available more liquidity to the cash-starved industry.
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The fiscal packages were mainly aimed at sacrificing tax revenue and raising public expenditure with a view to generating more demand for industrial goods.
With the economy recording a growth rate of 7.9 per cent in the second quarter (July-October), it is expected that the government may start withdrawing the stimulus, especially to contain rising fiscal deficit targeted to go up to 6.8 per cent of the Gross Domestic Product by the end of the 2009-10 financial year.
Addressing the captains of the industry here, Mukherjee said, "green shoots (of recovery) are now firmly taking roots. The recent data confirms it".
The factory output has recorded a growth of 10.3 per cent in October, Mukherjee said, referring to the recently Index of Industrial Production (IIP) data.
Besides, the export growth rate turned positive in November, recording a 18 per cent growth after a gap of 13 months.
Also, the Mid-Year Review of economy, tabled in Parliament last week, had said that economic growth rate could exceed 7.75 per cent during the year.
The recent growth projection is much higher that 6 to 6.5 per cent estimated earlier by the Reserve Bank of India and the Prime Minister's Economic Advisory Council (PMEAC).
Although the RBI had already kicked off the exit by raising Statutory Liquidity Ratio (SLR), the portion of amount banks put in government securities, by one percentage point to 25 per cent, the Finance Ministry has been maintaining that the stimulus should continue till there are signs of a sustained recovery.
