Representatives of Indian industry are rooting for extension of fiscal stimulus packages, instituted by the government to overcome recession. In their meeting with Finance Minister Pranab Mukherjee ahead of budget presentation, they expressed concern that withdrawal of stimulus may choke country’s economic growth.
Industry leaders have also demanded tax reforms with the launch of Goods and Services tax and bringing down fiscal deficit. Another demand put forth by the industry is for continuation of easy monetary stance.
With the food price inflation at an 11-year high and showing no respite, government has hinted at placing curbs on the extremely lax monetary stance in coming months. With the stimulus packages accomplishing its purpose and economy flourishing, the Reserve Bank of India has proposed lifting the cash reserve ratio of banks this month and raising policy interest rates subsequently.
Fiscal deficit, which is at 6.8% of GDP for the current financial year, has to be brought down to 5%. Venu Srinivasan of Confederation of Indian Industry said that this has to be achieved over time by keeping the need for growth and employment in view.
The Associated Chambers of Commerce and Industry said in a press release that the stimulus package should not be withdrawn suddenly and should be gradually phased out. This is vital as the industry is just coming out of recession and inflation rate has already increased significantly.
Various industry sources are proposing continuation of stimulus for six more months and implementation of GST in October as remedy to scale down cost of businesses. In a statement, the Federation of Indian Chambers of Commerce and Industry said that using restrictive monetary tools to manage supply side of food price inflation would be ineffective.
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