Seeking to counter the impact of the global slowdown on India, the Planning Commission today said that Centre should continue to provide stimulus to the economy in 2009-10, even while allowing the states to borrow more funds to step up capital expenditure.
Pointing out that the "global economy is not in good shape", Planning Commission Deputy Chairman Montek Singh Ahluwalia, who has recently returned from the World Economic Forum meeting at Davos, told reporters the "fiscal stimulus that we have given during the year should continue for one more year".
The permission given to states, as part of the second stimulus package, to borrow additional 0.5 per cent of their Gross State Domestic Product (GSDP), over and above 3 per cent, during the current fiscal should continue in 2009-10, he added.
The government, as part of the second stimulus package announced last month, allowed states to borrow an additional 0.5 per cent of GSDP to raise Rs 30,000 crore to fund capital expenditure. This was in addition to the 3 per cent of the GSDP allowed by the Finance Ministry in accordance with the recommendations of the Twelfth Finance Commission.
In order to boost the economy, reeling under the impact of a global slowdown, the government had announced slew of steps that include reduction in excise duty by 4 per cent and increasing public expenditure.
The government, through two supplementary demands of grants, raised public expenditure to Rs 9,00,000 crore, over and above Rs 7,50,000 crore estimated in the budget for 2008-09.
Besides, the RBI has announced monetary steps releasing Rs 3,88,000 crore and signalling a soft interest rate regime by cutting various policy ratios and rates.
