Worst over for Indian economy: Dr.Pranab Mukherjee

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India began to rollback tax cuts Friday as the government's new budget pledged to trim the swollen fiscal deficit while maintaining spending on social programs and infrastructure.

Presenting the budget for the fiscal year ending March 2011 to a belligerent Parliament, Finance Minister Pranab Mukherjee said India's fiscal deficit, now 6.5 percent of gross domestic product, would shrink to 5.5 percent of GDP, before falling to 4.1 percent of GDP by 2013.

As expected, he also hiked excise taxes by an average of 2 percentage points. The government had cut those taxes by 6 percentage points in the wake of the financial crisis to stimulate spending.

His pledge to reinstate duties on petroleum products and raise exise taxes on petroleum and diesel to 1 rupee a liter brought angry parliamentarians to their feet, shouting and raising their arms in protest.

"Give me attention," Mukherjee shouted back. "Please do not prevent the presentation of the budget."

Higher taxes threaten to hit consumers as inflation is rising. Policy makers worry that double-digit food inflation is beginning to spill over into nonfood sectors.

Mukherjee said the government's top priority is to "quickly revert to high growth of 9 percent, and then find the means to cross the double digit growth barrier."

India's economy has bounced back from the global downturn faster than many expected, helped by thundering growth in manufacturing.

The government said Friday that India's economic growth slowed to 6 percent in the October-December quarter, compared to 7.9 per cent in the previous quarter, largely due to a decline in farm output and some service sectors. The slowdown was largely expected, as a drought hit agricultural output and rural spending.

Mukherjee said India is on track to grow 7.2 percent for the fiscal year ending March 2010. He expects Asia's third-largest economy to grow 8.5 percent next fiscal year, before hitting 9 percent growth in 2011-12.

"We have weathered this crisis well. Our economy is in a far better position than it was a year ago," he told Parliament.

Investors seemed pleased, sending the benchmark Sensex index up 1.9 percent, to 16,564.98 points in midday trade.