India should begin to wind down the fiscal stimulus that was extended to the industry in the wake of the economic meltdown last year, even though the economy has not reached the high-growth trajectory, top economist Raghuram Rajan said on Sunday.
His comments came after Prime Minister Manmohan Singh on Sunday said that the government will take appropriate action next year to withdraw the stimulus. "I think it is quite appropriate to think about winding it (fiscal stimulus) down even though we may not have gone back to 9 per cent growth rate," Former IMF Chief Economist Raghuram Rajan told reporters at the India Economic Summit in New Delhi.
Rajan further said the country needs more fiscal space to deal with "unexpected eventuality". "When we look at our fiscal deficit and debt level, we really need more space to deal with unexpected eventuality...There are limits to government spending," he added.
Having recorded growth rate of nine per cent for three consecutive years, the economic growth rate decelerated to 6.7 per cent during 2008-09 as the economy came under the impact of the global financial crisis.