Stimulus packages to be withdrawn slowly: Rangarajan

Last Updated: Friday, September 18, 2009 - 00:49

Hyderabad: The Prime Minister’s economic panel on Thursday said the government and the RBI will have to slowly withdraw the stimulus packages given during the slowdown once the economy begins to show surer signs of recovery.

"There should, however, not be a premature withdrawal and
the RBI has to guard against re-emergence of inflation,"
Rangarajan said in his address on a two-day seminar on
`International Financial Crisis and Its Impact on India`,
today.

The former Governor of RBI said India would see "definite
signs of recovery" in the second half of 2009-10.

On growth forecast, he said this fiscal will see a rate
of 6 and 6.5 per cent, but it will be higher next fiscal.

"Fiscal 2010-11 will see a distinct improvement in growth
and economy will grow between 7 and 8 per cent. To go back to
9 per cent growth, we have to wait for the world economy to
improve and world trade to pick up," Rangarajan added.

On whether the fiscal stimulus have been helpful to the
economy in increasing demand, he said, it would finally depend
on whether or not the additional expenditures planned were
actually incurred.

"Also, we need to look at the composition of expenditure
and effectiveness of expenditures. Digging holes and filling
them up is not a right prescription," he observed.

On foreign capital inflows into the country, the EAC
chairman said there was a reversal in trend in the last three
to four months after the inflows shrank to just 9.1 billion
USD in 2008-09 from 108 billion USD in 2007-08.

"The flow of portfolio capital turned negative, so too
was trade credit. Things are changing now but they are not
going to be of the same order as earlier," Rangarajan pointed
out.

Andhra Pradesh Chief Minister K Rosaiah, in his address
said, despite the economic slowdown, the state government was
able to carry on with its welfare and development programmes
with massive investments, thanks to its "disciplined financial
management" in the last five years.

Bureau Report



First Published: Friday, September 18, 2009 - 00:49

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