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ShareNew Delhi: India will maintain its fiscal stimulus as there is economic uncertainty because of the poor monsoon and the global outlook, but fiscal prudence was still needed, the finance minister said on Tuesday.
Pranab Mukherjee said there was a distinct sign of pick-up in India's economy, and said banks have been told to boost lending as non-farm credit growth remained an area of concern.
India's economic growth slowed to 6.7% in the fiscal year through March after three straight years of at least 9%, and government officials have said growth in the current year is on track for roughly 6.5%.
"For the present, I maintain that the fiscal stimulus will have to continue, to allow its impact to fully run through the economy," Mukherjee told the annual Economic Editors conference.
"It is, however, an imperative to come back to the path of fiscal prudence, as soon as the current economic circumstances permit us to do so."
Mukherjee said a return to 9% growth path would take more than a year.
The finance minister's comments came a week after the central bank laid the groundwork for a rise in interest rates by tightening credit to the commercial property sector, lifting its inflation forecast and warning of asset price bubbles.
The Reserve Bank of India (RBI) left key interest rates on hold but surprised markets by removing emergency liquidity support measures implemented in 2008 to protect Asia's third-largest economy from the global downturn.
Policymakers including prime minister Manmohan Singh have pressed the case for keeping easy fiscal and monetary policies in place to nurture growth in Asia's third-largest economy.
