Government of India is facing lot of challenges at present and the way GDP growth rate is coming down it is not likely to bounce back very soon as it did in 2008 crisis . Last time Government of India had lot of liquidity and comfortable enough and was in a position to give stimulus. This time the situation is different and fiscal situation does not allow stimulus. Government cannot afford to give stimulus at this point. The negative IIP data after 2 years and the rupee depreciation to a record level are early indicator of a prolonged concern time for India. India Growth rate was one of the best and all over the World investor were looking towards India just one year back. Government itself has down sized the growth rate of FY 2012 to 7.5%. Last time during 2008 crisis Government had given huge stimulus of appx 36 Billion USD, which is not possible this time .Although last time stimulus increased the fiscal deficit by 3.5% to 6% it was not a big issue. This time it is not possible. This year even without the stimulus the fiscal deficit is likely to slip to 5.5% as against target of 4.6%. So no scope for stimulus. Government has no option to cut subsidy on fertilizer and petro products. As Government of India has little option the responsibility will be more on RBI to revive the economy. The tool is to cut interest rate. This is not expected at least before April 2012. Indian Rupee depreciation, the worst performer in Asia in 2012 is adding to the problem. The best option before the Government is to develop political consensus and go ahead aggressively with policy reforms on major sectors to boost the Economy.
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