Mumbai: Prime Minister has said that said Monday that the government will take all steps necessary to ensure that a ‘severe and prolonged’ global financial crisis does not derail India’s growth and urged leading industrialists not to make sweeping layoffs.
“I would like to assure each one of you that the government will take all necessary monetary and fiscal policy measures on the domestic front to protect our growth rates,” Singh told a group of 15 business leaders he called to a meeting in New Delhi.
“On the international front, we are working closely with other countries to ensure coordinated policy action and increased development cooperation for the containment of this crisis,” he said adding: “We will seek reform of the international financial institutions, and improved regulation and supervision, to prevent recurrence of such crises.”
He did not detail what those reforms might entail.
“The Indian government has already taken robust measures to infuse the nation’s financial system with liquidity and maintain an adequate flow of credit,” Singh said.
The Reserve Bank of India (RBI) has in recent weeks cut the key lending rate, the repurchase rate, from 9% to 7.5% and slashed the cash reserve ratio the amount of money commercial banks must keep on hand from 9% to 5.5%.
“We recognize that the situation is abnormal and we need to be constantly on the alert. The situation is being watched on a day to day basis and more steps will be taken if required,” Singh said.
“Inflation has abated and that the government will not shy from further fiscal stimulus to ensure that economic growth continues at a ‘reasonable level’,” he said.
India’s economic growth slumped to 7.9% in the April-June quarter from 9.2% in the same period last year. RBI recently downgraded its growth forecast to 7.5 to 8% for the year. Some private sector economists expect an even lower rate of growth.
He also added that the government would consider expanding investment in infrastructure, and work to ensure that infrastructure projects, both government-funded and public-private partnerships, do not get derailed for want of funds.
He said: “The government will also expand spending on health, education, rural and agricultural development.”
“Taken together, these efforts will help to maintain the pace of both growth and stability in the economy,” Singh said.
He advised that the business leaders present to be mindful of their social obligations as they try to cut costs and boost productivity.
“I hope there will be no knee jerk reaction such as large scale layoffs which may lead to a negative spiral,” he said adding: “Industry must bear in mind its societal obligations in coping with the effects of this global crisis.”
Among the 15 business leaders who attended the meeting were Mukesh Ambani, chairman of Reliance Industries, Sunil Mittal, chairman of the Bharti Group, Y.C. Deveshwar, chairman of ITC Ltd., K.P. Singh, chairman of DLF Ltd. and K.V. Kamath, CEO of ICICI Bank according to Taresh Arora, a spokesman for business group FICCI, who was at the conference.