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Stimulus package not sufficient to boost growth, say economists

Stimulus package not sufficient to boost growth, say economists

New Delhi: Economists say the twin packages announced by the government and Reserve Bank of India, or RBI, to boost India’s slowing economy is insufficient, as farmers’ concerns have not been addressed.

“This (stimulus package) is in the right direction, but not sufficient," Rajiv Kumar, director of Indian Council for Research on International Economic Relations (Icrier), said. However, “there is no talk about agriculture. It has been completely left out," he said.

“The economy needs a much bigger stimulus and I expect more measures... An employment guarantee scheme is needed. The size of the package should be increased," said Nagesh Kumar, director general of Research and Information System for Developing Countries, a think tank.

The government had raised the public expenditure during 2008-09 by Rs1.47 trillion in addition to budget allocations.

Expressing dissatisfaction at the second stimulus package, president of Federation of Indian Export Organisations A. Sakthivel said: “We find no serious consideration (of exporters’ demands) except extension of the DEPB (duty entitlement passbook) scheme."

Under the DEPB scheme, companies can avail of refund of customs duty paid on imported raw material for manufacturing products meant to be exported under the norms of the directorate general of foreign trade.

In order to reverse an economic slowdown, the government on Friday announced a second stimulus package seeking to raise public spending and making available easier credit for sectors such as exports, housing and small industries.

Simultaneously, RBI also cut key policy rates and ratios to infuse an additional Rs20,000 crore into the banking system, in addition to signalling a soft interest rate regime.

In addition to speeding infrastructure projects, Nagesh said the government should address the problems concerning job losses in certain vulnerable sectors such as handicraft and exports. This, he said, was imperative to make growth more inclusive at a time when the country was bearing the painful impact of the global slowdown.

The chairman of the Prime Minister’s economic advisory council (PMEAC) Suresh Tendulkar said implementation of the infrastructure sector projects would remain an issue. “I am not denying it and the government is trying its best to address it," he said.

The government had given Rs20,000 crore of additional funds for infrastructure as part of the first stimulus package unveiled on 7 December.

Tendulkar said the current fiscal was likely to end with a minimum GDP growth rate of 7%, down from 7.7% projected earlier by PMEAC.

It will revise its growth rate projection soon. “There would be some slowdown in the second half of the current fiscal," he said.

Commenting on the stimulus package, he said: “These packages are given to improve the sentiment of various market players as consumers are not investing, bankers are not lending...but when and how it will improve depends on them."

Asked if the package would be able to arrest the slowdown, Icrier’s Kumar said, “It depends on so many unknown factors. It depends on global recession, and the nature and scale of global recession is unknown."

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