India to review economy stimulus

The government says the challenge is to return to 9% growth

Stimulus measures introduced to boost the Indian economy during the downturn will be reviewed, the government said as it unveiled its annual budget.

Indian federal finance minister Pranab Mukherjee said the measures had helped to maintain strong growth, but inflation must now be controlled.

The government also pledged to cut debt levels and review public spending.

The Indian economy is expected to grow by 8.7% in the current fiscal year, Mr Mukherjee added.

"The Indian economy now, is in a far better position than it was a year ago," he said.

"The first challenge before us is to quickly revert to the high GDP growth path of 9%."

India's economy is recovering faster than expected - it grew at an annual rate of 7.9% in the three months to the end of September 2009, after growing 6.7% in the year to the end of March 2009.

Strong growth in India's manufacturing sector is also helping to compensate for falling agricultural output.

The government stressed the need to cut India's fiscal deficit, as well as cut public debt and spending.

The budget deficit has grown to its highest level in more than 15 years, at 6.9% of GDP. The plan is to cut this to 5.5% next year.

Economists have backed the government's focus on the threat of inflation, however.

In December last year, prices rose by more than 15% compared with a year earlier - the highest rate of inflation for 11 years.