Having started exiting from stimulus in the Budget for this fiscal, the government today said it intends to withdraw the economic prop-up measures at gradual pace only to keep the growth momentum.
"It is our intention to have a gradual and sequenced exit from stimulus, keeping in focus long-term fiscal sustainability concerns," Finance Minister Pranab Mukherjee told Economic Editors' Conference here.
In the Budget for 2010-11, the government started exiting from stimulus measures, given since December 2008 to spur economic growth impacted by the global financial crisis, by raising excise duty from eight to ten per cent.
The government began withdrawing stimulus measures to bring down fiscal deficit which has crossed 6 per cent in 2008-09, double of what was mandated by the Fiscal Responsibility and Budget Management Act.
In 2009-10, fiscal deficit widened further to over 6.5 per cent, but is now pegged at 5.5 per cent of GDP this fiscal.
Mukherjee said fiscal consolidation is accordingly caliberated to be supportive of growth in the medium-term and is broadly in line with the recommendations of the 13th Finance Commission.
The 13th Finance Commission has laid a roadmap of reducing fiscal deficit to 5.7 per cent of GDP this fiscal, 4.8 per cent the following year, 4.2 per cent in 2012-13 and 3 per cent next year.
Over Rs 1 lakh crore mopped up from spectrum sale for high speed mobile and broadband services against the target of just Rs 35,000 crore may help the government to easily meet the target for this fiscal.
However, a background note prepared by the Finance Ministry for the conference said," the impact of one-off nature of revenues might taper off in the months to come with a pick-up in expenditure and moderation in the levels of growth in revenues."
The note said going forward, there is a need to limit growth in expenditure so as to achieve a lower than budgeted level of fiscal deficit.
Experts said that the process of stimulus exit might coincide with introduction of the Goods and Services Tax sometime next fiscal.
The government has proposed two rates for goods at 10 per cent and six per cent each for the Centre and states and service tax at 8 per cent.
A momentum in GST would be made, Mukherjee said.
States finance ministers and union finance ministry officials would meet in Goa later this week to iron out differences over GST, which has already missed is April 2010 deadline. It is also unlikely to meet the revised timeframe of beginning of next fiscal.
