Amid the debate on withdrawal of the stimulus, including speculation of a possible across-the-board roll back of cuts in excise duty and service tax, the document suggested further reduction in excise for export oriented industries.
An end to easy money policy could lead to higher cost of funds, which could hurt investments and stunt growth.
With budgetary preparations on in full swing, the Reserve Bank of India on Friday advised the Finance Minister to at least partially roll back the stimulus that was provided to help the industry cope with the financial crisis.
India said said that rolling back of fiscal and monetary stimulus packages, injected by the government to counter the effects of economic downturn, at this stage would be "counter-productive and disastrous to the industry."
The political mood seems to have changed in most Organisation for Economic Cooperation and Development capitals, and it would be very difficult for any government to justify new stimulus measures in today's environment. Public pressure to reduce government budget deficits and minimise public debt burdens is growing across the developed world.
The recovery in the second half of 2009 would be largely due to the hefty stimulus packages.
Will consider extending full support after reviewing the situation, says Sharma.
Advance estimates of national income growth released today by the Central Statistical Organisation (CSO) project it at 7.2 per cent in 2009-10, pegging it a notch below earlier forecasts of the Reserve Bank of India (7.5 per cent) and finance ministry (7.75 per cent). With economic growth back on track the government may initiate a phased withdrawal of the fiscal stimulus package.
Earlier, finance minister Pranab Mukherjee had said the fiscal stimulus given to the industry to combat the adverse impact of the global financial meltdown would not be withdrawn before the budget next year.
The gross domestic product grew by 6.1 per cent in the first quarter of 2009-10 and the year may end with 6.5 per cent.
Ahead of the monetary policy review on October 27 by the Reserve Bank of India, he plans to hold consultations with the apex bank and would not like to comment on issues like where interest rates are headed.
"The December and February stimulus packages, which included a cumulative 4 percentage point excise duty cut, have helped the industry register this growth," said Nandi, adding that the festive season would bring more cheer, unlike last year, when the slowdown was taking effect.
The US government said its massive $787-billion economic stimulus package, unveiled to rescue the country from the worst recession in decades, will benefit the development of cities and create jobs.
The government package, different from the RBI's announcements, is likely to be unveiled on Sunday by the prime minister's office, a source said. The government is expected to announce several fiscal measures such as cut in excise duty on some products, to boost the growth.
Delivering his major economic policy speech at the prestigious Brookings Institute, Summers, however, candidly acknowledged that it is 'surely' too early to gauge the broader economic impact of the President's programme.
The proposals under consideration include waiving the current 5 per cent Customs duty on naphtha and reducing the excise duty on mono ethyl glycol from 8 per cent to 4 per cent. The Cabinet secretariat has sought views from various ministries and departments for this package.
The United States Senate on Tuesday passed Barack Obama's economic recovery plan, the $829 billion stimulus bill, which the President said would create four million jobs and was vital for reviving the crisis-hit economy. Amid strong Republican opposition, the bill was passed by a roll call vote of 61-37. The House of Representative has already passed it.
"The package addresses a wide range and should hopefully give boost to the slowing economy," said Amit Mitra, secretary general, FICCI. The chamber expected the government to review the impact of these measures and fine tune policies on a continuous basis. "We further hope that these measures would be followed by a series of measures as we go along and as the situation demands."
R Sridhar, managing director, Shriram Transport Finance Company, said, "The depreciation advantage will only benefit large and medium truck and bus operators, who are also tax payers. But their size in the market is quite small when compared to small operators who form about 75 per cent of the CV market."
According to official sources, the government is likely to announce a major fiscal stimulus package for housing, auto and export sectors on Saturday. The government might also cut cut excise duty on commercial vehicles, and further relax the external commercial borrowing norms. This will help exporters and others.
The industry, which has complained of widespread job losses along with a sharp decline of about 30 per cent in its expected export target for the current fiscal, wants a quick action from the government. Industry sources say that even if the government releases the funds, the banks would take another month to disburse them.
US President Barack Obama on Saturday said he hopes to sign into law the mega economic stimulus package within a month to revive the US economy as there seems to be bipartisan agreement in this regard among members of Congress.
They'll mostly fall within five main areas and 22 specific job titles.
Prime Minister's economic advisory panel has said there was no need for any stimulas package to help the industry tide over the impact of the crisis following downgrade of the US credit rating by Standard and Poor's.
Indian policy makers will have to evolve an exit strategy that maintains high growth with price stability.
Asserting that the withdrawal of stimulus is in the best interest of the economy in the current scenario of high inflation, the RBI said that it has started unwinding the emergency measures plugged in during the financial crisis.
Although not intended as fiscal stimulus, the unprecedented fiscal expansion during 2008-09 and 2009-10 did help in combating the economic slowdown, but it cannot continue and measures must be initiated to chart a route for fiscal consolidation.
The 30 share Sensex ended up 183 points at 27,470 and the 50-share Nifty gained 44 points to close at 8,295.
After a 13-month contraction following the slowdown in demand in the western markets, India's exports started recovering from November.
Industrial growth zoomed to 16.8 per cent in December 2009, giving hope to the government that overall economic growth may be faster and rekindling a debate on withdrawal of stimulus packages in the Union Budget.
The first woman president of any apex industry body said with over 10 per cent increase in factory output in August Assocham will revise its earlier GDP estimate of 7 per cent for the current fiscal.
Excise duty was cut by six per cent in two phases since December 2008 from a peak of 14 per cent earlier to perk up the economy, which came under the impact of deepening financial crisis.
With the stimulus measures primarily comprising cut in indirect taxes, the Survey said there is likely to be a shortfall in tax collections under these heads.
Encouraged by signs of growth revival and desperate to reduce the fiscal deficit Union finance minister Pranab Mukherjee is expected to take this step when he presents his Budget to parliament on 26 February.
Minister of Finance Pranab Mukherjee while pressing the Budget 2009-10 in Lok Sabha on Monday has said that the government has taken several measures to counter the negative fall -out of the global slow down on the Indian economy.
It wants to wait for more evidence of solid economic growth before making any changes.
The declines also tracked the Indian rupee, which fell to a record low as central bank measures to tighten capital outflows and curb gold imports were seen as unlikely to prop up the currency and could even spark further selling if they spook foreign investors.
To shore up the tottering the US economy, President-elect Barack Obama and the Democrats are planning a new massive fiscal stimulus package that could run into as much as $700 billion over the next two years, rivalling the bailout sum Congress committed last month.
Markets end higher ahead of Fed outcome, China stimulus
Non-Banking Finance Companies to get additional Rs 25,000 crore liquidity support; PSU banks to provide Line of Credit to NBFCs for purchase of commercial vehicles.
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