In the next month we will have new budget where government will try to impact fate for the next year. Recently came across an article where it was mentioned that auto mobile sector showing continuous rate of growth especially in the year 2009-10.Read in Brand Wagon by financial express, Pawan Munjal saying “The calendar year 2009 has indeed been our best ever performance”. I tried to find out why every auto company was showing growth in last two quarter.
I found out that this is basically measure taken by both governments fiscal and monetary policy. Excise duty for automobile sector cut from 12% to 8% and interest rates were low in the same period which provides adequate finance to the customer.
Then I questioned does the time has come that government should gradually cut fiscal stimulus to these sectors which are showing continuous growth rate. I think time has come because if we look at the government fiscal deficit which is as high as 6.8 per cent where as FRBM recommends it should be around 3 per cent. This figure 6.8 per cent does not include state deficit, oil and fertilizer subsidies. If we include them it will be around 11 per cent. A developing country cannot afford to have such a high amount of deficit on a continuous basis. Even though RBI had start taking its Exit route from the subsidized interest that it provided to specific sector in the time of recession.
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