India to pump prime economy with ’substantial’ package (Roundup)December 5th, 2008 - 6:32 pm ICT by IANS
New Delhi, Dec 5 (IANS) Prime Minister Manmohan Singh is expected to announce a multi-billion rupee package here Saturday to pump prime the economy, with sector-specific measures to help India Inc overcome the impact of global slowdown.Along with the package, the government may also permit state-run fuel retailers to cut the prices of gasoline and diesel to ease the burden on average citizens, top ministers said in separate interactions with reporters here.
Simultaneously, Reserve Bank of India (RBI) Governor D. Subbarao may also announce some monetary policy measures like lowering of lending rates and easier and cheaper access to credit for exporters to help the corporate sector.
“Yes, the government is looking at an economic stimulus package. This will not be just one single package. It will have many parts,” Commerce Minister Kamal Nath told reporters here on the margins of an India-Russia conference.
“We hope to finalise it by Saturday,” the minister said, adding that it would have measures specifically aimed at helping sectors like real estate for the exporting community.
“Lowering interest rates and an interest subsidy on bank loans to exporters could form part of a stimulus package, which is likely to be announced by the government and the Reserve Bank on Saturday,” Kamal Nath added.
The central bank governor, alongside, has scheduled a press conference in Mumbai at noon Saturday, during which he is widely expected to announce a reduction in some key rates, including the interest charged on borrowings by commercial banks.
“There is a need to create demand in construction, infrastructure services and exports,” Commerce Secretary G.K. Pillai said, adding: “The package will be substantial.”
Asked about the specific details of the package, Pillai said: “Let the prime minister announce it tomorrow.”
With prices of crude oil coming down from a peak of $150 per barrel a few months ago to under $45 now, there is also a proposal to allow state-run oil-retailing companies to lower the prices of petrol and gasoline, in which they are making profits.
“We are trying to announce this along with the prime minister’s economic stimulus package tomorrow,” said Petroleum Minister Murli Deora.
The prime minister, who retained the finance portfolio lst week after shifting incumbent P. Chidambaram to home ministry, had held a meeting with some of his cabinet colleagues and top policymakers Tuesday to discuss the fiscal package.
Besides himself, the meeting of what is called the Apex Group, was attended by the new Home Minister Chidambaram, Planning Commission Deputy Chairman Montek Singh Ahluwalia and Reserve Bank Governor Subbarao, among other officials.
The fine-tuning of the package then was left to a panel led by Cabinet Secretary K.M. Chandrasekhar, with its other members drawn the ministries of finance, commerce and industry.
The need for pump priming the economy was felt especially in the wake of a decline in India’s exports in October for the first time in three years, as also because of a recession in the US - the country’s largest market for goods and services.
Although policy makers do not see India slipping into a recession, they felt the impact of a global slowdown on the Indian economy could be more severe than imagined without a targeted approach, with the potential to significantly lower growth from the an average of nine-percent in the past four years.