With economic revival still in initial stages, the head of the Prime Minister’s Economic Advisory Council, C Rangarajan, today indicated the fiscal stimulus would be withdrawn in phases.
“It will be calibrated and done in a manner that stimulus in the economy continues to persist and at the same time some adjustment is made as far as the deficit is concerned,” he said on the sidelines of the annual financial services convention organised by the Bombay Management Association. He said the global recovery was expected to be slow.
At the same time, the former central bank governor said, the government should try to lower the fiscal deficit when it presented the Budget at the end of the month.
“It has been repeatedly pointed out that the process of (stimulus) exit must be gradual, coordinated and not sudden. It should not disrupt the economy. All efforts will be made to bring down the fiscal deficit in the Budget,” he said.
While industry wants the government to continue the stimulus, economists are in favour of a withdrawal so that the Centre can return to the path of fiscal consolidation.