No more tax cuts with stimulus III, says Montek

Govt to focus on implementing the first two packages.

A third stimulus package that the government is considering will not include tax cuts to boost demand, Montek Singh Ahluwalia, deputy chairman of the Planning Commission, said.

“Don't expect any tax rate changes between now and the Budget as far as the third stimulus package is concerned,” he said at the CII Partnership Summit.

“It is a mistake to sit around in a world where people do not know what the signals are and they expect further tax breaks,” he added.

The government after announcing the second fiscal package in the first week of January ruled out further deficit-financing till a new government is formed, possibly before June 2009. Senior government officials including Ahluwalia, however, are meeting exporters and industry organisations on Wednesday to hear the industry demands.

Ahluwalia said the key issue confronting the government now is implementing the two packages. “The most important thing is to implement the stimulus package that has been announced. (By) Merely announcing the package the expenditure does not start flowing. In the next two months implementation has to be the top priority,” he added.

As part of the first fiscal package, the government announced an across-the-board cut in excise duty by 4 percentage points and an additional plan expenditure of Rs 20,000 crore. In the second round, the government focused on facilitating finance to affected sectors like non-banking finance companies and infrastructure firms.

Ahluwalia added that a fiscal stimulus package will be necessary in the later part of the 2009 calendar year.

“The fact is that calendar year 2009, with the world as a whole, will be see the pain continue. At best there could be a gradual recovery in the later part of the year. The need for a stimulus was there in 2008, and will be there in 2009. The government has to work towards that,” he said.