Stimulus to continue until economy recovers firmly: FM.

Finance Minister Pranab Mukherjee said fiscal and monetary stimuli will continue till the Indian economy is on a firm growth path. "As I mentioned, until the economy is on firm recovery path, it (stimulus) will continue," Mukherjee told reporters after the Reserve Bank of India released its mid-term review of the Annual Policy Statement.

In its policy review, the central bank kept all key interest rates unchanged but raised the Statutory Liquidity Ratio of banks to 25% of their net demand and time liabilities from 24%. The finance minister said the economy has responded well to the policy steps by the government and the RBI over the last one year. "RBI and the ministry of finance are working in close cooperation, and this will continue," he said.

Mukherjee said government agreed with RBI's assessment of the economic situation. RBI has kept its growth forecast for 2009-10 unchanged at 6.0% with an upward bias, but raised its inflation forecast to 6.5% with upward bias from 5.0%. Mukherjee said he agreed with Prime Minister's Economic Advisory Council's growth forecast of 6.5% in 2009-10. On the food grain situation, Mukherjee said there was enough stocks and there will be no shortage in the country despite a fall in kharif crop output due to weak monsoon. "We have taken major steps to ensure that the adverse impact of inflationary pressures is reduced by strengthening the supply management and importing commodities, which are in short supply," he said. The finance minister said industrial production has started picking up but exports may not pick up till the advanced economies recover. "Unless there is recovery of the world economy, particularly North America and Europe, the prospects of having robust growth of Indian exports is not likely to happen. But the encouraging trend is that the rate of decline (in exports), which was very high in earlier months has been reduced," he said. India's merchandise exports have been falling for the past 11 months. However, the rate of decline in exports has come down to 19% in August from 33% in April.