Mixed reaction from industry to stimulus packageJanuary 2nd, 2009 - 9:26 pm ICT by IANS
New Delhi, Jan 2 (IANS) The second stimulus package unveiled Friday is in the right direction but falls short of expectations that it would be around Rs.1 trillion, as against the Rs.200 billion (Rs.20,000 crore) announced, a leading industry lobby said.According to D.S. Rawat, secretary general of Associated Chamber of Commerce and Industry (Assocham), an across-the-board cut of 4 percent in ad-valorem Cenvat rate, removal of the ceiling on external commercial borrowings (ECB) and extension of the duty-entitlement passbook (DEPB) scheme are welcome measures.
Assocham also appreciated the central Reserve Bank of India’s decision to reduce the cash reserve ratio (CRR) and the reverse repo rate (RRR) respectively by 50 and 100 basis points, and said it would provide some relief to industry.
“However, the CRR reduction should also have been on par with reverse repo rate,” Rawat said, adding that the statutory liquidity ratio (SLR) should also be brought down to 20 percent from the existing 24 percent.
The Federation of Indian Chamber of Commerce and Industry (Ficci) also felt the package would help prop the economy.
“By combining monetary as well as fiscal measures, the second stimulus package addresses a wide range of concerns and should hopefully give big boost to the slowing economy. It is a set of positive measures,” said Ficci secretary general Amit Mitra.
“The chamber believes that the authorities will review the impact of these measures and fine tune policies on a continuous basis. We further hope that these measures would be followed by a series of measures as we go along and as the situation demands”, he added.
Maintaining that the additional Rs. 20,000 crore infused in the system through the CRR cut should leave more liquidity with the banks, Mitra said: “It is now important for banks to come out and lend to corporates rather than invest money in government securities as they have been doing earlier.”