Home Minister P Chidambaram said on Saturday that Indian economy is not facing recession but a is experiencing a slowdown,which is more pronounced in the manufacturing sector,and called for more stimulus packages to ensure that aggregate demand remains high.
The country was not facing a recession and was only experiencing a slowdown,Chidambaram said,speaking at the launch of the IFC-VenturEast-BYST-sponsored fund to promote grass roots entrepreneurship in India. He said the word recession was being used “loosely” in India.
“India is facing a slowdown,with the manufacturing sector facing a sharper slowdown. It is important that we take counter and corrective measures to ensure that demand remains very high. While the government has taken a number of fiscal measures and the RBI monetary measures,perhaps more measures are necessary,” he said.
Chidambaram,who was till recently the country’s finance minister,said the Indian economy suffered a “monetary shock” following which overseas and non-banking credit had “virtually” dried up in the country.
“The entire burden of providing credit has fallen on the banks,and within the banking system a large proportion has fallen on public sector banks,” he said.
“Thanks to our policies,our public sector banks are strong,very sound and continue to lend,” he said,adding,lending must be increased to stimulate the domestic demand.
“I hope that the Reserve Bank of India and the government can and will work together to ensure there is fiscal stimulus and a supported monetary policy to ensure aggregate demand does not fall too much,” he said.
The International Finance Corporation,a World Bank Group,VenturEast,a private equity manager and Bharatiya Yuva Shakti Trust,an NGO,had joined hands to promote grassroots entrepreneurs in India.
Outlining his government’s commitment to boost small and medium enterprises,Chidambaram said various plans had been chalked out to help them in the last 4-5 years.
“A very large proportion of jobs are in this sector,while 40 per cent of India’s exports are done by the SMEs. Therefore it is important to nurture this sector” he said.
“Today banks are obliged to lend up to Rs five lakh without any collateral while guarantee amount has been extended from Rs 50 lakh to Rs one crore… some business may fail,but that should not deter us from providing loans and risk capital to small businesses,” he said.
Lending institutions like SIDBI should “continue to push lending to SMEs,” he said and assured more sops for SMEs from Government.
He described as “understandable and unavoidable,” big businesses becoming “winners” when more opportunities opened up,saying they alone can come up with big projects such as mining,oil and infrastructure. “But small business is equally important,’ he said.
Lauding Indians for their innovative capabilities,the former Finance Minister said this made them taste success wherever they went. Innovation provided the much needed edge to an economy,he said adding,”Indian young men and women are bubbling with ideas”. Chidambaram lauded the Corporate-NGO initiative for recognising entrepreneurs.