Indian Government Resists Pressure For Third Stimulus Package

by Lorys Charalambous, Tax-News.com, Cyprus

18 February 2009

With elections on the horizon, India's acting Finance Minister Shri Pranab Mukherjee on February 16 announced an interim budget bereft of new tax proposals.

Having already announced two rounds of stimulus measures in recent months, Mukherjee told parliament that it would be irresponsible for the present government to propose a third major tax and spending package with the possibility of an imminent change of administration.

The General Election is set to take place in April or May 2009, and Mukherjee said that, if necessary, a new stimulus package should be unveiled in the full budget, which could be announced as early as May.

In December of last year, the Indian government unveiled the first of two stimulus packages aimed at boosting the economy. This first package comprised a number of important measures - most notable of which was the inclusion of an immediate cut of 4% in the ad valorem Excise Tax rate on several non-petroleum products.

The second package - announced in January of this year - contained measures aimed more at bolstering the country's small and medium-sized enterprises, exporters not targeted by earlier initiatives, and the real estate sector.

Compared with stimulus packages pushed through by governments elsewhere in world however, these have been relatively small affairs, totalling about USD4bn. By comparison, the economic recovery legislation due to be signed by US President Barack Obama will total almost USD800bn.

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