The International Monetary Fund has suggested that India should begin fiscal consolidation with the next budget as the deficit has entered into the double digits due to the stimulus measures taken to revive the economy.
"Although we believe that the stimulus measures that were put in place were instrumental in supporting activity during the crisis, it has pushed the deficit into double digits again, and the debt back to nearly 80 per cent," IMF Deputy Director, Asia and Pacific Department, Kalpana Kochhar told reporters in a conference call on Thursday.
"We, therefore, recommend that the fiscal adjustment strategy begin with this next budget, which the Finance Minister (Pranab Mukherjee) has already announced will happen, and we believe it should be anchored on a debt target along with some nominal expenditure rules," she said.
India last year announced tax cuts and increased expenditure to prop up the economy hit by the global economic slowdown. The Reserve Bank had also cut its key policy rates to pump more money into the system.
The government in its budget for 2009-10 had proposed to raise Rs 4.5 lakh crore from the market, up from Rs 3.1 lakh crore in the previous year and pegged the fiscal deficit at 6.8 per cent of the GDP as against 6.2 per cent in 2008-09.