New Delhi: Hit by a credit crunch and crash in the stock markets, Finance Minister P Chidambaram said on 10 October that main problem is liquidity and government would do everything to tackle it.
The Reserve Bank of India cut the cash reserve ratio by 1% to ease liquidity pressures, Chidambaram said and announced to set up a high-powered committee headed by Finance Secretary to assess the requirement.
Responding swiftly to the pressure witnessed on the economy, Chidambaram, who is in Washington to interact with global leaders on the financial crisis, said in a statement “I have asked the group (committee) to begin work immediately, visit Mumbai and summit the interim report within a week.”
Chidambaram, whose statement was read by Finance Secretary Arun Ramanathan, said that World Bank has already stated that India was in a better position to weather the global storm.
Market crashed by nearly 1,100 points within minutes of opening but recovered substantially after the RBI move to cut the CRR to inject an estimated Rs40,000 crore in addition to Rs20,000 crore due to cut in mandatory deposit ratio by 0.5% on Monday.
RBI has already reduced the CRR by 150 basis points, which will inject a total of about Rs60,000 crore, he said.
The Prime Minister had convened a special meeting of the Union Cabinet on Wednesday to assess the ripple effect of the global meltdown on the Indian economy where Chidambaram had said adequate liquidity would be provided whenever needed.