In the backdrop of Reserve Bank of India's (RBI) advice to the government to withdraw some of the stimulus measures, industry chamber Ficci today cautioned it will be "dangerous" for economic growth and employment if the fiscal incentives given to spur economy were rolled back.
Ficci's comments comes at a time when everyone is counting days for the big day of Budget, likely on February 26.
Ficci Secretary General Amit Mitra said it is a difficult choice between promoting growth and containing fiscal deficit, which is pegged at over 6 per cent for the current fiscal due to duty cuts and increased public expenditure.
He said he expects Finance Minister Pranab Mukherjee to "lean on the side of growth".
Pointing out that RBI has already started withdrawing from accommodative policy, he said if interest rates rise due to this then these steps would be proved to be "premature".
If fiscal stimulus is also started to be withdrawn it would be "dangerous", he added. "This way you will hurt both economic growth and employment generation."
Jobs are important for the political economy, he said.
Mitra further pointed out that RBI has itself said in its monetary review the recovery process is not yet broad-based.
He said exports and imports are still not picking up, reflecting that domestic and overseas economies are yet to recover fully. For SME sector, projects are not taking off in large numbers as interest rates are high, he further said.
The Reserve Bank had said in its monetary review, "For short-term economic management and medium-term fiscal sustainability..., it is imperative that government returns to a path of fiscal consolidation. The consolidation can begin with a phased rollback of the transitory components."
