Ficci Wants Stimulus To Stay For Exports (03-Mar-2010)
Ficci President Rajan Bharti Mittal stated that the government should carry on with the stimulus package for exports and areas that still need support.
This it should do although the industry should not expect them to continue in perpetuity.
However, he said a partial withdrawal of the stimulus packages in the Budget was the right step.
He also pointed out that areas such as exports and small and medium sectors will require government support for some more time.
He said that he had requested the Finance Minister not to withdraw anything on export stimulus as they are just about on the recovery stage and withdrawal will hurt it badly.
Meanwhile, exports were badly bruised by the global crisis 18 months ago and have started showing signs of revival only since November 2009.
It has registered a growth of 18%.
But in January, exports could increase by 11.5% to $14.34 billion compared to the same period in 2008-09.
The government, on the other hand, came out with 3 stimulus packages, cutting duties and raising government spending beginning December 2008.
Last week, the Budget partially rolled back excise duty.
Totally, he said that any stimulus that is given can not be for perpertuity and the industry cannot be on the crutches of stimulus package for their life.
Previously, the Minister of State for Commerce and Industry, Jyotiraditya Scindia hinted at reorganizing of several incentives given under many stimulus packages to fragile sectors still facing weak global demand.
The result for a change in the stimulus measures for the sectors recovering from the impact of global crisis will be taken after March 31 after a review of the working of the various incentives.
The Union Minister for Commerce and Industry, Anand Sharma had already hinted at re-look at the incentives given to various sectors.
Meanwhile, Commerce and Industry Minister Anand Sharma stated that it would be a blunder to take back the fiscal stimulus to the labour-intensive sectors.
Mr Anand Sharma said this hardly three days before the Union Budget.
He said that there are several labour-intensive sectors which still have problems and are doing badly and it would be a mistake to withdraw support to those sectors.
Earlier, India Inc stated the global economy is yet to recover from the affect of the downturn.
It did not agree with the proposal of the Prime Minister''s Economic Advisory Council (PMEAC) on taking back stimulus.
CII said that there is a need to carry on with the stimulus measures for some time as the global economy yet to revive.
Additionally, the Federation of India Export Organizations (FIEO) asked the government to continue the incentives for at least another one and a half years.
This is in the midst of speculations that stimulus measures could be rolled back in the forthcoming Budget.
India''s exports started recovering from November after a 13-month contraction due to the slowdown in demand in the western markets.
However, Prime Minister''s Economic Advisory Council (PMEAC) Chairman C Rangarajan stated that in the upcoming Budget for the withdrawal of stimulus, the government should come out with a roadmap.
When asked whether the Budget should start the process of exit, he said that what is required is a roadmap towards normalization.
He also said the stimulus exit has to be a gradual process as the word rollback is too strong in expression.
Earlier, Prime Minister''s Economic Advisory Council chairman C Rangarajan stated that the exit measures must be gradual, in the midst of speculation of the government taking back stimulus.
He said that exit measures should be regulated in a manner that stimulus in the economy should continue while at the same time, some adjustments will be made to bring down fiscal deficit.
Ficci warned it will be dangerous for economic growth and employment if the fiscal incentives given to boost economy were withdrawn.
This was said by it since RBI had earlier advice to the government to take back some of the stimulus measures.
Ficci''s comments come at a time when everyone is counting days for the big day of Budget, likely on February 26.
In economics, fiscal policy is the use of government spending and revenue collection to influence the economy. Fiscal policy can be contrasted with the other main type of economic policy, monetary policy, which attempts to stabilize the economy by controlling interest rates and the supply of money.
The possible problems with fiscal stimulus include the time lag between the implementation of the policy and detectable effects in the economy, and inflationary effects driven by increased demand. In theory, fiscal stimulus does not cause inflation when it uses resources that would have otherwise been idle.
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