BJP’s bailout plan to beat India’s financial crisisOctober 14th, 2008 - 9:16 pm ICT by IANS
New Delhi, Oct 14 (IANS) The main opposition Bharatiya Janata Party (BJP) Tuesday suggested 12 points to government to beat the current financial crisis.BJP leader Arun Shourie advised the government to consider the following points:
1. First and foremost, a line of liquidity must be assured. Liquid mutual funds are the most vulnerable part of the financial structure at the moment; last week, two liquid mutual funds had to be shored up and Monday, three had to be given urgent assistance by Life Insurance Corp (LIC).
2. The 150 basis point cut in the CRR announced Oct 10 is a first but inadequate step. It should be brought down to 5 percent.
3. Oil bonds and other off-budget items (such as fertiliser subsidies) need to be included in budgetary calculations as government borrowing.
“Once we bring these items on to the government’s balance sheet, they can be converted into SLR (statutory liquidity ratio) bonds. With these measures, we will introduce further liquidity into the system,” Shourie said.
4. Government must, through SIDBI and other appropriate institutions, ensure funds for small and medium enterprise (SMEs). Failure to do so will result in massive unemployment, and exacerbate social tensions.
5. Measures should be initiated to ensure funds for the Rural Employment Guarantee Scheme reach intended beneficiaries, and loans against Kisan Credit Cards released.
“These blockages (of funds) - which could not be inadvertent - must be opened so that funds are available to the farmers in particular,” he said.
6. Steps should be taken to bring the repo rate down by 200 basis points by March 2009.
7. Restriction on interest rates to be paid to NRIs should be relaxed, and the government and RBI should float the equivalent of the India Millennium Deposits and the Resurgent India Bonds instituted by the NDA government.
“Today, NRIs are fearful about their savings. NRIs are looking for a safe haven for the savings. Today, they cannot be paid more than Libor plus 75 basis points for their deposits - this at a time when the most creditworthy entities abroad are not able to get even short-term funds at Libor plus 400,” Shourie said in explanation.
Apart from other advantages, he said such a step would ease the pressure on the rupee and help stabilise the exchange rate.
8. P-notes are being abused and should be discontinued.
9. Naked short selling must be outlawed, and short selling in itself must be regulated and made completely transparent.
10. Forex reserves should be used to finance and expedite infrastructure development. India must set up a sovereign wealth fund, which is professionally and competently managed, to invest these reserves effectively.
“For four years, the Government has gone on debating what to do with foreign exchange reserves. A good proportion of them have been parked in US Treasury Bonds,” Shourie said.
11. Banks should be enabled to go in for rights issues to infuse liquidity and make them more competitive.
12. The Indian debt market should be opened further to calm the FIIs. Regulations should be altered to enable them to invest in and hold government and corporate bonds, thereby providing a safe asset as well as reasonable returns.
“For the country, by helping dampen the pressures on FIIs to withdraw funds, it will help stabilise the exchange rate,” the BJP leader said.
- India's central bank cuts rates to push growth (Lead) - Apr 17, 2012
- Inflation forces another rate hike by India's central bank (Second Lead) - May 03, 2011
- India's central bank cuts interest rates to spur economy (Roundup) - Apr 17, 2012
- 'Qualified foreign investors can directly invest in equity markets' - Jan 01, 2012
- Inflation forces another rate hike by India's central bank (Lead) - May 03, 2011
- India raises overseas investment limit in government bonds (Roundup) - Jun 25, 2012
- Ask NRIs to increase remittances: Assocham - May 13, 2012
- Soaring prices prompt India's central bank to hike key rates (Roundup) - Jan 25, 2011
- Shifting focus to growth, RBI infuses Rs.320 bn into system (Roundup) - Jan 24, 2012
- Overseas funds bought Indian stocks worth $282 mn during week - Jul 31, 2011
- Indian central bank hikes policy rates again to curb inflation - Mar 17, 2011
- P-notes holders will not be taxed: Mukherjee - Mar 30, 2012
- India Inc welcomes rate cut (Lead) - Apr 17, 2012
- India raises overseas investment limit in government, corporate bonds (Lead) - Jun 25, 2012
- Inflation forces India's central bank to hike rates again (Roundup) - May 03, 2011
Tags: arun shourie, bailout plan, budget items, india millennium deposits, massive unemployment, oil bonds, resurgent india bonds, small and medium enterprise, social tensions, statutory liquidity ratio