New Delhi: The Congress-led UPA government on Thursday indicated that it would take more measures in the coming weeks to boost the economy, which is reeling under the impact of global financial meltdown, even as the Reserve Bank of India (RBI) said there is more room for rate cuts.
“All measures necessary to boost (the) economy will be taken... support which the economy requires will be given. When I reply to the debate (on the budget next week), I may be in a position to indicate some more detailed information,” finance minister Pranab Mukherjee said while replying to supplementaries in the Rajya Sabha.
The finance minister’s statement comes a day after RBI governor D Subbarao said in Tokyo that there is more room for reduction of key policy rates, especially in the backdrop of falling inflation. Inflation has already dipped to a 13-month low of 3.92%.
Mukherjee, who presented the interim budget in the Lok Sabha on Monday, said he could not announce “many radical” measures in the interim budget presented earlier this week due to constitutional constraints.
“I had constitutional constraints to take too many measures involving too much resources because mandate of the government is coming to an end and (the) new government will take over after elections,” he said.
The government had earlier announced two stimulus packages to boost economic growth, which is expected to moderate from 9 per cent to 7.1% during the 2008-09 fiscal.
Talking to reporters in Tokyo, Subbarao had said, ”There is certainly room for cutting rates. The question is whether we should cut rates, when we should cut rates and by how much we should cut rates.”
Mukherjee too said in the Upper House that fiscal correction and monetary changes should go side by side so that impact on the economy is maximum.
The finance ministry, he added, was in touch with the central bank for future course of action to boost the economy.
To overcome economic slowdown, which has been reflected in negative growth in industrial output and exports, the minister said more investments would have to be made in sectors that would create more jobs.
“In course of time, it will be possible for us to put it (the economy) on right track,” he said.
India is yet to feel fully the impact of the global economic meltdown that has already pushed the US, Japan, Singapore and Europe into recession.
In December 2008, India -- the world’s second fastest growing economy -- recorded a negative growth in industrial production and further slowdown in exports.
“I don’t know how much time it will take to assess the situation,” the minister said, adding, “problem is complicated, situation is difficult... There is no room for complacency.”
Mukherjee said there was no need to be unduly concerned about the free trade agreement (FTA) with Asean as it was under negotiations and will take some time for finalization.
On the initiative of the US, the G-20 Summit on ‘Financial Markets and the World Economy’ was held in Washington in November, he noted. It agreed to discuss the effects of the crisis and advance a common understanding of its causes and steps needed to combat it.
Regarding depletion in the foreign exchange reserves, the minister said the nation had enough reserves and “we need not be worried about that”.
The foreign exchange reserves of the country, according to the latest RBI estimates, have depleted by about $55 billion since March 2008.
India currently has foreign exchange reserves of about $255 billion.