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Journalism of Courage
The much-talked about second stimulus package by the government and rate cuts by the RBI are likely in the next few days to arrest slowing economic growth and slackening demand, and meet the shortage of funds due to the global slowdown.
“We are trying to coordinate a number of different steps. And I hope in the next few days we will be ready to make an announcement (about the second stimulus package),” Planning Commission Deputy Chairman Montek Singh Ahluwalia told reporters here today.
He said there were various suggestions on these and they had been referred to Cabinet Secretary K M Chandrasekhar.
It’s important to make sure the earmarked expenditure is utilised. The Planning Commission has not proposed new expenditure for the current year, Ahluwalia said.
He also said with the inflation rate coming down to almost half its peak of 12.91 per cent in August and the economy struggling to achieve a solid growth rate, there is scope for easing the monetary policy.
“It is clear at the moment that the economy is growing below its potential and inflation is definitely on its way down. And these factors would suggest that there is scope (for easing monetary policy),” Ahluwalia said.
Besides, RBI Governor D Subbarao today met Prime Minister Manmohan Singh at his residence, fuelling speculation that the RBI might signal further cuts in interest rates to boost economic growth, which has been impacted by the global crisis.
As part of the first stimulus package announced on December 7, the Government cut excise duty by 4 per cent and decided to raise public expenditure by Rs 20,000 crore to boost demand.
The Reserve Bank has infused Rs 3,00,000 crore into the system through cuts in policy rates and reserve ratios.
In response to its latest cut in short-term rates by 100 basis points, many banks led by SBI have cut interest rates.
Today, second-largest PSU lender PNB, Bank of Baroda and Dena Bank have announced a 75 basis point cut in prime lending rates. However, industry is asking for cheaper funds.
With industrial production contracting by 0.4 per cent in October, for the first time in 15 years, and exports declining by over 12 per cent during the month, the Government came out with a stimulus package on December 7 to spur growth and help industry combat the impact of the global financial meltdown.
Growth slowed to 7.8 per cent in the first half and there are fears of further slowdown in the second half. The mid-year review of the economy, presented in Parliament recently, said that growth may slow to 7 per cent this fiscal.
The government has increased public expenditure by Rs 1,47,000 crore through two supplementary demands.
