India wants to wind down stimulus measures

Finance minister Pranab Mukherjee today hinted at India withdrawing the economic stimulus measures extended to various industries hit by the global slump, saying it is hurting the country's fiscal stability.

He did not give any timeframe for withdrawing the stimulus measures that inflated the government's budget deficit, but merely said India will not be able to sustain high fiscal deficit in the long run.

The G20 meeting in London gave rise to much wrangling over the fiscal stimulus measures announced by the various individual governments in the wake of the financial market tsunami that followed the collapse of the Wall Street banks.

Echoing the finance minister's concerns, Raghuram Rajan, noted economist and advisor to the prime minister, also said India should begin to wind down the fiscal stimulus extended to the industry, even though the economy has not reached the high-growth trajectory.

The views of the finance minister and the PM's economic advisor are in stark contrast to a wider view among G20 nations that the stimulus action should not be terminated half way through the revival process.

Mukherjee said prime minister Manmohan Singh had also told industry leaders in New Delhi on Sunday that the government intents to wind down stimulus measures next year.