Policy push only option | ||
OUR SPECIAL CORRESPONDENT | ||
New Delhi, Dec. 15: Finance minister Pranab Mukherjee today reaffirmed the importance of reform measures such as the contentious FDI in retail and goods and service tax to revive a slowing economy — as the scope for alternatives such as a fiscal stimulus and the lowering of interest rates is limited. The UPA had recently proposed 51 per cent FDI in retail but had to beat a retreat in the face of a vociferous Opposition. The goods and service tax proposal, too, has faced stiff resistance from the BJP. The government has to take policy initiatives to kick start a sputtering economy as options for fiscal stimulus and lowering of interest rates are limited, Mukherjee said today. "However, there is potential for policymaking in other areas," the minister said. Indian industry contracted 5.1 per cent in October, the first time since March 2009, sparking stock selloffs by foreign institutional investors and a fall in the value of the rupee. "We must turn our attention now to reviving growth as quickly as possible," Mukherjee said. The slump, the minister said, is "partly a reflection of global trends, but our own fight against inflation has also taken a toll on investments by our corporations". The Reserve Bank of India is expected to come up with its quarterly monetary policy tomorrow, but bankers do not expect any policy rate cuts as inflation still remains above 9 per cent as it has for the better part of the calendar year. Sharp increases in interest rates by the RBI to batter down inflation have slowed down growth; with inflation still high, the central banker has few options to give growth a push. Many believe it could ease money supply by cutting the cash reserve ratio. The government is also unable to come up with any major extra spending plans which can boost the economy. The government needs to "come up with practical policy options to address the challenges before us", Mukherjee said. |
| ||||
More stories in Business |
• ATF price cut • RBI steps in to support rupee • Indo-Pak trade seen to jump 3-fold • Deals defy economic gloom • UBS golden boy trader turns villain • Policy push only option |
No comments:
Post a Comment