If the words of the Prime Ministers Economic Advisory Councils (PMEAC) chairman are any indication,then you can expect some tax cuts in the upcoming interim budget on February 16. A tax rate reduction is desirable in the current context. However,I cannot comment on its quantum… it is for the RBI to decide… Tax rate cuts could essentially generate more purchasing power, said PMEAC chairman Suresh Tendulkar on the sidelines of a round-table on Economic Outlook 2009-10.
In the wake of slackening economic growth,the PMEAC chairman also did not rule out the possibility of another fiscal stimulus package to boost economic growth. We cannot rule out another stimulus package in the interim budget, he said.
Because of the pending general elections,the government will be coming out with an interim budget and vote-on-account to seek the approval of Parliament to meet essential expenditure during the first four months of the next financial year. The final budget is likely to be tabled some time in July by the new government.
The EAC today revised the advance estimates for national income and lowered the gross domestic product (GDP) growth rate to 7.1 per cent during 2008-09 from 9 per cent earlier. However,he affirmed that the growth rate cannot slide below the 7 per cent mark. The Indian economy cannot grow below 7 per cent… lower interest rates are going to come into play to leverage consumption and investment, he said.
According to Tendulkar,the combined fiscal deficit of federal and state governments is expected to be 10 per cent of the gross domestic product during the fiscal year 2008-09.
Replying to questions related to the management of oil prices,Tendulkar said: It is the right time to get out of administrative price mechanism as oil prices have come down.
The government had earlier tried to move away from the administrative price mechanism,but the decision was virtually abandoned after the government re-started fixing the prices of petrol,diesel and cooking gas.