With the economic recovery still looking fragile, corporates and economists warn against any hasty withdrawal of the government-sponsored economic stimulus package, launched in the wake of the recent worldwide economic crisis.

The talks of a move by the Government of India to initiate the process of exiting the economic stimulus package from the financial year 2010 have not gone down well with India Inc. as well as most economists, as they feel that it would derail the recovery process which is still nascent. Many argue that since the robust recovery was due to the low base effect and that growth being still fragile, the Indian industry will need the support of stimulus till September 2010. But on its part, concerned by the growing food prices, which has reached 20% in recent months, the government is hard-pressed to find an early solution to tame the inflation monster. It is here that policy makers feel that proper monetary tightening measures may achieve the desired. However, industry experts argue that food inflation is led by supply-side constraints and thus monetary tightening at this hour will not solve the issue, and rather it would hamper the growth. According to Venu Srinivasan, President, Confederation of Indian Industry (CII), "The government could consider withdrawal at the time of introduction of the proposed goods and services tax," as the economy is still under the grip of low base effect. At the pre-budget meeting, it was advised to exempt profits from exports from tax to bring back exports on the growth track. Corporate captains also requested the government to delay the implementation of the new Direct Tax Code (DTC), under which it is proposed to levy Minimum Alternate Tax (MAT) on gross asset base.

The Analyst Magazine, Economic Stimulus, Economic Recovery, Economic Crisis, Central Public Sector Undertakings, CPSUs, Global Financial Crisis, Budget Management, Global Commodity Prices, Foreign Portfolio Investment, Foreign Direct Investments, FDIs, Indian Export Organization.