It was the final day of the India Economic Summit and finance minister Pranab Mukherjee had the last word.
He said the stimulus will be withdrawn only after a sustained recovery and also pointed out that the global scenario would need to change significantly for that to happen.
So what is India’s plan to return to a 9 per cent growth level?
Prime Minister Manmohan Singh might have made his stand clear on exiting the stimulus by next fiscal, but the finance minister chose to play the balancing act on Tuesday at the summit.
Fresh from his return from the G-20 meeting in Scotland, Mukherjee is clear that each country will have to take its own call on exiting stimuli provided to overcome the recession and the stimulus in India will continue till domestic demand is strong enough.
“I feel that strong domestic demand is necessary. How are we going to respond to it if the world is going to go for more and more protectionist measures? In 12 consecutive months, exports have gone down. Europe, North America and Japan account for 60 per cent of our export market and its not easy for us to diversify so soon.
Unless robust recovery in developed nations take place, we will have to wait,” Mukherjee said.
But for the withdrawal to come in due course global economic recovery is necessary. The finance minister, however, is not waiting for that.
He is looking inwards for a solution and has identified agriculture and infrastructure as two key sectors, which will need "massive" investments.
Mukherjee said, “Infrastructure investment is needed to drive growth. A lot of investment in rural infrastructure is also needed. Industrial revival has to continue and it’s necessary for strong domestic demand.”
Mukherjee expects India’s economy to grow by more than 7 per cent during the next fiscal year and hopes it can get back to the 9 per cent growth figure by 2012, but for a government tight on its finances, he feels fiscal consolidation is imperative.
At the summit, the finance minister made it clear that an economic recovery will have to take hold for the stimulus to be withdrawn.
But he also pointed out that indications of a recovery have started trickling in through positive industrial growth figures.
So, given the government's high fiscal deficit, the exit strategy may well be upon us next year.
CAclubindia
