The new government at the Centre is likely to come out with stimulus measures to boost the economy as well as to "sustain the sentiment", an economist with financial services firm Moody's has said.
"Even if the new government is cash-strapped, more stimulatory measures or supportive steps will be announced. This is needed not just for boosting the economy but also for sustaining sentiment," Moody's economy.Com economist Sherman Chan told PTI in reply to an e-mail query.
However, the large public debt burden would constrain the size of any fiscal boost.
To boost the economy, the government came out with two fiscal stimulus packages in December and January, which included excise duty reduction and various incentives across the sectors.
Besides, as part of the interim budget, the government also announced excise duty and service tax cut.
Sherman further said that the RBI might further slash short-term lending (repo) rate by 100 basis points to four per cent by the middle of 2009 as economic conditions remain tough and inflation is falling sharply.