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India to review economy stimulus India to review economy stimulus
(about 1 hour later)
India's government said stimulus measures introduced to boost growth during the downturn would be reviewed, as it unveiled its annual budget. Stimulus measures introduced to boost the Indian economy during the downturn will be reviewed, the government said as it unveiled its annual budget.
The measures helped to maintain strong growth over the past year, but the authorities now say that rising prices must be controlled. Indian federal finance minister Pranab Mukherjee said the measures had helped to maintain strong growth, but inflation must now be controlled.
The government projected an 8.7% growth rate for the current fiscal year. The government also pledged to cut debt levels and review public spending.
Federal finance minister Pranab Mukherjee said the challenge was to return to 9% growth. The Indian economy is expected to grow by 8.7% in the current fiscal year, Mr Mukherjee added.
"The Indian economy now, is in a far better position than it was a year ago," he said.
"The first challenge before us is to quickly revert to the high GDP growth path of 9%."
India's economy is recovering faster than expected - it grew at an annual rate of 7.9% in the three months to the end of September 2009, after growing 6.7% in the year to the end of March 2009.India's economy is recovering faster than expected - it grew at an annual rate of 7.9% in the three months to the end of September 2009, after growing 6.7% in the year to the end of March 2009.
Strong growth in India's manufacturing sector is also helping to compensate for falling agricultural output.Strong growth in India's manufacturing sector is also helping to compensate for falling agricultural output.
Mr Mukherjee said the economy was now in a "far better position than a year ago". The government stressed the need to cut India's fiscal deficit, as well as cut public debt and spending.
"We need to reduce the stimulus, important to the economy, and move towards the preferred path of fiscal consolidation," he said. The budget deficit has grown to its highest level in more than 15 years, at 6.9% of GDP. The plan is to cut this to 5.5% next year.
Mr Mukherjee stressed the need to cut fiscal deficit, review public spending and cut public debt. Economists have backed the government's focus on the threat of inflation, however.
The government also announced plans to introduce a Goods and Services Tax and reform direct taxes in April 2011. In December last year, prices rose by more than 15% compared with a year earlier - the highest rate of inflation for 11 years.