New Delhi: The Government on Friday expressed its inability to provide a fiscal stimulus as was given in 2008-09 to boost the economy, which is likely to slow down to 7.5 per cent this fiscal.

"Of course I am not in a position to provide that level of fiscal stimulus which I was able in 2008-09, but certain policy changes can improve the situation a little bit which we are doing," Finance Minister Pranab Mukherjee said at a Summit organized by a media house here.

In the wake of the current global uncertainty, Mukherjee said the growth in 2011-12 may moderate to about 7.5 per cent, down from 8.5 per cent in the previous fiscal. In the Budget for 2011-12, Mukherjee had projected a GDP growth rate of nine per cent plus/minus 0.25 per cent.

"We cannot expect that we can reach a high growth rate of nice per cent overnight. We will have to live with relatively moderate growth this year. Next year, we will try to improve the growth rate higher," he said.

To provide a cushion to Indian industry against the impact of global financial meltdown, the government in 2008-09 had provided three fiscal stimulus packages, amounting to Rs 1.84
lakh crore or three per cent of GDP.

The stimulus boosted domestic demand and helped India to clock a GDP growth of 6.8 per cent in 2008-09, Mukherjee said.

Referring to the issue of stimulus, Deputy Chairman of the Planning Commission Montek Singh Ahluwalia too said that there was no case for stimulus to industry as fiscal deficit was high and might exceed the Budget estimate of 4.6 per cent of GDP by about one percentage point.

"I don't think it (slowdown) has happened because of lack of stimulus... What is the case for stimulus," Ahluwalia said.

Government's expenditure in the first seven months of the current fiscal stood at 54.1 per cent of the Budgeted spending, thus pushing fiscal deficit to 74.4 percent of the 2011-12 target.

Admitting that it was extremely difficult to maintain the fiscal deficit target of 4.6 per cent of GDP in the fiscal, Mukherjee said, "I am hopeful of fiscal balance targeted...(but) state governments also needs to work  towards fiscal sustainability".

Expressing concern on FII outflows from the Indian stock markets, he said the ongoing Eurozone crisis was driving away foreign institutional investors.

"Up to now the indication on the FDI inflow is much better compared to last year but FII outflow is an area of concern," he said.

RBI rates in tune with price situation: FM

Finance Minister Pranab Mukherjee indicated that the Reserve Bank of India (RBI) will
adjust policy rates in tune with the price situation.

"These are all weekly (inflation) figures. Monthly figure is yet to come. RBI is watching the situation. As and when they will consider necessary, they will adjust the monetary policy. That is their job and they are doing it efficiently and effectively," Mukherjee told reporters here on Friday.

"I would not like to make any comment on that (rate revision) right now. Only point I shall have to emphasise on is that this declining trend we shall have to watch for a longer period of time, not on a weekly basis," he said.

Meanwhile, Minister of State for Finance Namo Narain Meena, in a written reply to the Lok Sabha, said, "In the forward guidance of the second quarter review of the Monetary Policy 2011-12, the RBI has reported that notwithstanding current rates of inflation persisting till November, the likelihood of a rate action in the December mid-quarter review is relatively low."

"Beyond that, if the inflation trajectory conforms to projections, further rate hikes may not be warranted," Meena added.

Food inflation moderated considerably to 8 per cent during the third week of November from over 9 per cent in previous weeks. General inflation also declined to 9.73 per cent in October.

In its mid-year credit policy review, the RBI had said that inflation, which was ruling near the double-digit mark, will start cooling by December this year and is likely to come down to 7 per cent by March, 2012.

In a bid to tame inflation, which has been above the 9 percent-mark since December last year, the RBI has hiked interest rates 13 times since March, 2010.

The RBI raised the repo rate by 25 basis points to 8.50 per cent and the reverse repo moved up by a similar percentage to 7.50 per cent in its last policy review in October. Repo is the short-term rate at which the Reserve Bank of India (RBI) lends to banks, while reverse repo is the rate at which it gets funds from banks.

The central bank has hiked policy rates five times this fiscal. In the last-one-and-a-half months alone, it has raised the key rate (repo) by 50 basis points.

(Agencies)