Finance Minister Pranab Mukherjee cautioned one and all that Indian economy has not recovered completely and is still not broad-based. However, he expressed optimism that the economy will put up a good show despite its below-par performance in the third quarter.
The FM said that the GDP growth slipped to 6% in Q3 due to shortfall in farm output and can touch a decent 7.2% growth in Q4. Mr. Mukherjee was addressing the National Council of Confederation of Indian Industries yesterday.
The FM said that economy remains to be driven mostly by governmental spending. This means that stimulus withdrawal in one-go would prove detrimental to the growth momentum. He clarified, “Keeping the incomplete economic recovery in mind, it was my objective to keep the stimulus until we can see the fruits of economic growth spread through to all sectors of the economy.”
Responding to the clamor for rollback of excise duty hike, he said, “The rollback of stimulus has been only partly carried out in the matter of excise duties by 2%, which is lower than pre-stimulus rates.”
Further justifying the introduction of excise and customs duty on crude oil, he said, “This is not a new duty. It was already in vogue till June 2008 and was only removed when global prices shot up. It couldn’t be re-imposed when the stimulus was announced, even though prices had cooled.”
Mr. Mukherjee termed the easing of income tax rates as an extension of stimulus. According to him, this move would give salaried consumers more expendable income.
The FM also clarified the role of proposed Financial Stability and Development Council. He said the council would not dilute the powers of existing regulatory bodies like RBI and SEBI, but would serve as an early warning system.
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