Excise duty hike reasonable, says Rangarajan

Prime Minister's economic advisor C Rangarajan on Friday described the government's decision to hike excise duty as "reasonable" and said it would help in containing fiscal deficit.

"In order to bring about a reduction in fiscal deficit, I think the modest rise in excise duty is quite reasonable," Chairman of Prime Minister's Economic Advisory Council (PMEAC) Rangarajan said.

Finance Minister Pranab Mukherjee while unveiling his Budget proposals for 2010-11 raised excise duty by 2 per cent to 10 per cent, partially rolling back the stimulus provided to the industry to combat the impact of the global financial meltdown.

The increase in excise duty is expected to fetch the exchequer Rs 14,000 crore. Earlier, as part of the stimulus measure, the government had reduced the excise duty in two tranches from 14 per cent to 8 per cent.

The Budget, according to Rangarajan, "Tried to strike a balance between the need for fiscal consolidation and providing stimulus to growth."

"By making the fiscal deficit at 5.5 per cent of the GDP in the next fiscal, we have set the country in the right direction as far as fiscal consolidation is concerned," he added.

Mukherjee in his Budget proposed to bring down the fiscal deficit to 5.5 per cent of the GDP from 6.9 per cent during the current fiscal.