The government is preparing a second plan to stimulate the economy, going by recent statements by commerce and industry minister Kamal Nath.
There is growing pressure on the Manmohan Singh government to “do something” about the sharp slowdown in production and exports. Tata Motors managing director Ravi Kant told Mint that he is looking to a big bang fiscal package to help his industry. The crisis-ridden real estate business continues to ask for more help. Others such as the shipping industry have also thrown their hat into the lucrative ring.
We have often expressed our fears in these columns about what extra spending will do to India’s already weak public finances. Another worry: announcing a small package for a few select sectors every now and then is bad strategy. One, it will spark off further lobbying wars to grab public resources. Two, companies will keep hoping for new incentives, and thus prefer not to spend on new capacity right away. That will worsen the slowdown.