The government would continue to stimulate domestic demand and will not rollback fiscal sops until robust recovery is visible globally, finance minister Pranab Mukherjee said on Tuesday. He added the government will have to take corrective action in due course and return to fiscal consolidation.
The minister expected the economy to grow at more than 7% in 2010-11. ?I will be happy if I have 7% plus (GDP) for the next year and 8% the year after. May be by 2012, we will be able to reach the magic figure (of 9-10% growth),? he said at the India Economic Summit organised by the World Economic Forum and CII.
He also asked for massive investments in agriculture sector and infrastructure, especially power sector, and acknowledged that it would not be easy for India to compensate for the loss in exports through domestic demand. ?It is not easy for us to diversify the market overnight and make up for the loss, so we would have to wait for some time,? he said.
Return to fiscal consolidation is on the government?s agenda but the domestic support would have to continue till the robust recovery takes place in developed countries, he said.
The government and the Reserve Bank of India had cut taxes and interest rates and introduced several fiscal measures to counter the impact of global economic meltdown that started in September 2008. As a result, the fiscal deficit, which measures the excess of government expenditure over revenue, is projected to touch 6.8% of GDP in 2009-10.
?Umpteen numbers of times I have stated that in due course we shall have to take corrective measures (phasing out of fiscal stimulus) but still I do feel that strong domestic demand is necessary. It (stimulus) will continue for some more time,? he said.
Replying to questions on tax evasion, Mukherjee said the country will start negotiations with all 77 countries for revising the double tax avoidance treaties. ?I have asked the revenue department (in the finance ministry) to reopen negotiations for all 77 double tax avoidance agreements we have entered so far so that we can have real time exchange of information on tax evasion and tax avoidance,? he said.
On climate change, the minister said, developed countries need to appreciate that clean technologies would have to be made available to the rest of the world at affordable cost. He said the Copenhagen Summit on climate change in December will be productive in finding ways for reaching clean technology to the developing nations.
