Seeking to infuse confidence in the economy,Prime Minister Manmohan Singh today said there was a case for interest rates to come down and ensure credit flow in the countrys financial system to neutralise the effects of the global downturn.
Arguing that ample liquidity coupled with low inflation leaves possible scope for further moderation in interest rates,Singh is understood to have told industry leaders here that credit flow for productive needs ought to be ensured. The Prime Minister is concerned about the economy and said there was a need to take it on the growth track. He said whatever is required will be done. He said interest rates need to come down and said the RBI would look into it. The Prime Minister was also optimistic that we would be able to move ahead in future, industry body Federation of Indian Chambers of Commerce and Industry (Ficci) president Harshpati Singhania told The Indian Express after emerging from the meeting Singh had with industry doyens. RBI governor D Subbarao was also present in the meeting,he said.
Taking stock of the economy post the stimulus packages,the Prime Minister said: There are signs of improvement in sectors like steel and cement… Rural demand for goods and services appears quite robust and the outlook in the agriculture sector leaves room for optimism. He said public sector banks disbursed more credit in the current fiscal than in 2007-08 but the lending by private sector and foreign banks was reduced to one-third to one-fourth of that a year ago.
The challenges before the country,according to him,included: tackling a regime of low inflation and demand uncertainties across some sectors of the real economy,ensuring that the financial sector remains healthy and supportive,husband foreign exchange reserve responsibly,sustain a high level of expenditure bearing in mind the need for fiscal discipline. He also impressed upon the industry leaders the challenge to counter job losses caused by the slowdown.
Suggesting that the meeting was a highly positive one,Singhania said,We appraised the Prime Minister of our feelings on the economy. There seems to be a slight improvement in the sentiment,but we still have to do much more. Interest rates are still very high,which should come down for investment-led growth and cheaper credit has to be made available to consumers as at these rates people are not buying. It is till a negative outlook.
Kumar Birla of AV Birla Group and Sunil Mittal of Bharti told the PM that even service sectors such as telecom were showing signs of stress. Not to mention the Business Process Outsourcing and the IT sectors that were badly hit. Services account for over 50 per cent of the countrys GDP.
The industry leaders told Singh that the government should continue to focus on execution of projects and remove the bottlenecks in their fructification. They also sought continued support for such projects in the interim period till the new government was in place.
Other industry doyens present were Tata Group Chairman Ratan Tata,Rahul Bajaj,S K Munjal,Venu Srinivas,Sajjan Jindal,J P Gaur,R P Goenka and senior officials from the chambers of commerce and industry.