Thursday, July 2, 2009

Economic Survey 2009: Tax cuts as part of stimulus

Ahead of the Budget 2009-10, the economic survey on Thursday suggested tax cuts and increase in government expenditure as part of another stimulus package to help the economy overcome the global shock.

"The uncertainty surrounding the macroeconomic developments worldover in 2009-10 and the need for minimising the second round impact of the global shock calls for a continued fiscal policy stimuli," said the Economic Survey for 2008-09 tabled in Parliament today.

The survey said the next round of stimulus could include both tax cuts and increase in government expenditure.

"Within the proposed fiscal expansion, the mix of expenditure and tax cuts would be critical in the context of its impact on overall macroeconomic fundamentals like growth, interest rates and exchange rate," the survey said.

The survey said stimulus packages given so far were selective to address the affected sectors and promote investments that would not only boost demand in the short run but yield long-run growth dividends.

The three stimulus packages provided by the government have cut excise duty by 6 per cent, service tax by 2 per cent and raised planned expenditure, resulting in widening of fiscal deficit to over 6 per cent in 2008-09.

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