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Saturday, December 06, 2008

Govt to unveil multi-pronged stimulus package


With the Mumbai terrorist attacks dealing another brutal blow to the already slowing Indian economy, the Government decided to swing into action yet again. Prime Minister Dr. Manmohan Singh, who also assumed additional charge of the Finance Ministry, drew up a stimulus package aimed at pump-priming the economy. The package is likely to include measures like setting up a special infrastructure fund, interest subsidy for housing and export-dependent sectors (like textiles, handicrafts and leather), besides more monetary measures, such as interest rate cuts. Reports also said that Commercial Vehicle makers could get a cut in excise duty while the NBFC sector too is likely to get some sops. Other likely measures include increased spending on infrastructure, special credit window for select sectors like power and roads and enhanced credit period and insurance cover for exporters. Meanwhile, the Reserve Bank of India (RBI) will take a call on the options that include a cut in the repo and reverse repo rates, besides reduction in the CRR. Currently, the repo rate stands at 7.5%, the reverse repo at 6% while the CRR is at 5.5%. The central bank has cut the repo rate by 150 bps while the CRR has been lowered by 250 bps, and the Statutory Liquidity Ratio (SLR) 100 bps in the last 2-3 months. Tuesday's meeting, headed by the Prime Minister, was attended by Planning Commission deputy chairman Montek Singh Ahluwalia and RBI governor D. Subbarao. Former Finance Minister and newly appointed Home Minister P. Chidambaram was also present at the meeting.