Shweta Rajpal Kohli and Haris Usman
Monday, February 08, 2010 (New Delhi)

The wheels of the economy seem to be moving in the right direction as the govenrment on Monday estimated the GDP to grow by 7.2 per cent for this financial year 2009-10.

Given the economy on the growth track, top govt officials argue that it is time to withdraw the stimulus.
“If it looks that economy is back on a seven plus percent growth path, which is evident, I think we’ll do much better than that next year. Yes, we should say the stimulus has succeeded and we should begin to phase it down,” said Planning Commission Deputy Chairman Montek Singh Ahluwalia.

A big relief is that despite a severe drought, agriculture growth is expected to be flat not negative as expected earlier.
“While the third quarter will be adverse for agriculture, fourth quarter will be much better, more robust, so overall agriculture may not see the kind of dip that was put out by some people,” said Finance Secretary Ashok Chawla.

In its mid term economic review, the finance minsitry pegged GDP growth at 7.75 per cent, and the Reserve Bank of India projected the economy to grow by 7.5 per cent in its quarterly monetary policy review last month.
With less uncertainty on the growth front, policymakers feel the finance minister has enough room to start withdrawing stimulus or the tax support that he had given to the industry at the time of the crisis.

This means in the forthcoming budget you may see excise and service tax rates going up which in turn may lead to cars and consumers goods becoming more expensive.