Stimulus drives up deficit 34%
New Delhi, March 30: India’s fiscal deficit rose by 34 per cent between April and January due to the stimulus measures taken by the government to boost the economy at the time of the global financial crisis.
The fiscal deficit was Rs 3.5 lakh crores in the first 10 months of the financial year as compared to Rs 2.62 lakh crores in the same period in the previous year.
The government had cut a number of taxes to boost industrial growth besides increasing spending on infrastructure and social projects.
The net result of the fiscal stimulus package was that there was an increase in fiscal deficit from 2.6 per cent in 2007-08 to 5.9 per cent in 2008-09 and 6.9 per cent for 2009-10.
According to the Economic Survey 2009-10, the fiscal stimulus amounted 3.3 per cent of the GDP in 2008-09 and 3.9 per cent in 2009-10. However, in the Union Budget, the finance minister started the gradual withdrawal of the stimulus package by hiking excise duty by two per cent to bring down the deficit.
Even analysts agree with the government’s decision to withdraw the stimulus. “When you are expecting growth to jump to 8.5 per cent you have to start to withdraw the fiscal stimulus,” an economist with a leading rating agency said. He said that there will be some impact of the withdrawal of the stimulus package on the industrial growth. “But then you have to take a balanced view, you can’t just look at one side. The government also needs to look at the fiscal situation,” he said.
The finance minister plans to bring down the fiscal deficit to 5.5 per cent in 2010-11, 4.8 per cent in 2011-12 and 4.1 per cent in 2012-13. The government plans to borrow Rs 3,45,010 crores in 2010-11 to meet its fiscal deficit.
AGE CORRESPONDENT
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