Govt to assess economic situation before exiting stimulus

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SME Times News Bureau | 31 Oct, 2009
Finance Minister Pranab Mukherjee has said the government would first assess the economic situation in the third quarter before taking a stand on withdrawing the fiscal stimuli it has extended to the corporate sector.

"We need to watch for the third quarter before taking a view on exiting the fiscal stimulus," Mukherjee told delegates here at the Hindustan Times Leadership Summit, an annual conference that organisers say seeks to push discussions on pressing issues.

The government released around Rs.3 lakh crore since last December as stimulus packages.

Besides this, Reserve Bank of India, the country's central bank, pumped in more than Rs.2 lakh crore in the money market to bring down interest rates.

But experts feel these measures, if not withdrawn in time, could prove inflationary and impact growth.

Mukherjee disagreed with these predictions, asserting growth would pick up from the October-December quarter of the next fiscal and hoped that the country could return to 9 percent growth in the next two years riding on growth in the agriculture sector.

"To achieve 9 percent growth in the next two years from now, we would have to maintain agriculture growth," he said, adding that 2009 was an "extraordinary year" with drought and floods impacting kharif (summer-monsoon) crop production.

Agriculture accounts for 18.5 percent of India's gross domestic product (GDP).

The average growth rate of agriculture and allied sectors during 2006-07 and 2007-08 has been more than 4 percent as compared to the average annual growth of 2.5 percent during the 10th Five-Year Plan that ended 2007.