Calibrated exit from stimulus not to hurt growth: FinMin

Government says revival process will not be affected

“The exit strategy was, however, so calibrated that it would not affect the revival process and help Indian economy to grow at estimated 8.5 per cent during 2010-11,” said a quarterly review statement on trends and expenditure prepared by the Finance Ministry.

Taking note of the prevailing uncertainties in the global economy, it added that the exit strategy has been designed in such a way so as to not risk the revival process.

“Green shoots were emerging. However, it was difficult to predict the recovery and final outcome for 2010-11, particularly with some signs of sovereign debt crises emerging from parts of the European economy,” said the review prepared by the government in pursuance of the Fiscal Responsibility and Budget Management Act. Following the global financial meltdown in 2008, the government provided three stimulus packages, which included steps like cutting tax rates and raising public expenditure.

After emergence of signs of a revival, the government started gradually withdrawing the concessions given to industry to fight the impact of the global meltdown.

Growth up

Growth, which slipped to 6.7 per cent during 2008-09 from over 9 per cent in the previous three years, rose to 7.4 per cent in 2009-10 and is now slated to improve further to 8.5 per cent in the current fiscal. Further, higher realisation from the auction of 3G and broadband wireless access (BWA) spectrum has improved the fiscal position of the government during the first quarter of 2010-11, the report said.

At the end of June, both fiscal and revenue deficit has shown improvement over the figures during the corresponding period of 2009-10, said the quarterly review statement.
“Although much of the improvement in government finances is due to higher non-tax revenue receipts from 3G spectrum and BWA auctions, tax receipts have also shown positive trends,” it said. The fiscal deficit, which is the difference between the total expenditure and total receipts, worked out to 10.5 per cent of the Budget estimates at the end of June this year. The figure was 31 per cent at the end of first quarter of the previous fiscal.

Similarly, the revenue deficit up to June this year was at 3.8 per cent of the budget estimate, down from last year’s 38.1 per cent during the same period, it added.