India's stimulus package first step to revive growth
Sunday, 7 December 2008
NEW DELHI, Dec 6 (AFP): An Indian stimulus package expected this weekend will be the first of several steps to prime an economy hit by the global recession and shaken further by the Mumbai attacks, a minister said.
Analysts expected the central bank to cut interest rates Saturday to revive lending paralysed by the worldwide credit crunch and spur demand while the government was expected to unveil a fiscal stimulus plan.
"This will not be a single package. There will be a first package, second and third part of it," Commerce and Industry Minister Kamal Nath said yesterday.
"We hope to finalise it" by Saturday, he said.
The two-pronged monetary and fiscal move is seen aimed at helping shield the economy from the global downturn and boost confidence undermined by the Islamist militant attacks on financial hub Mumbai, analysts said.
Economists have warned of a chill effect on the economy.
"Short-term sentiment has been rocked," said Deepak Lalwani, India director of Astaire and Partners in London.
Commerce Secretary GK Pillai said the stimulus package prepared in consultation with the central bank would be "substantial" but would not reveal details, saying, "Let the prime minister announce it tomorrow (Saturday)".
The government package is expected to contain measures to boost infrastructure spending, help the hard-hit vehicle industry and provide interest rate subsidies for export sectors.
Announcement of the stimulus moves would come a week after the end of the 60-hour siege in Mumbai in which gunmen attacked two luxury hotels, a popular cafe, a railway station and a Jewish centre.
Prime Minister Manmohan Singh, a respected economist who opened up India to foreign investors when finance minister in the 1990s, has taken over the portfolio again after naming Finance Minister Palaniappan Chidambaram home minister to bolster security.
Singh this week forecast growth of 7.5 per cent for the year to March 2009. But economists say it could be as low as 6.8 per cent this year and 5.5 per cent the following year.
"Companies across sectors have begun announcing plant shutdowns and delays in project implementation," financial house Citi said in a report forecasting 6.8 per cent growth this year.
"The negative factors appear to more than offset the possible lagged impact of aggressive monetary easing and lower commodity prices."
Analysts expected the central bank to cut interest rates Saturday to revive lending paralysed by the worldwide credit crunch and spur demand while the government was expected to unveil a fiscal stimulus plan.
"This will not be a single package. There will be a first package, second and third part of it," Commerce and Industry Minister Kamal Nath said yesterday.
"We hope to finalise it" by Saturday, he said.
The two-pronged monetary and fiscal move is seen aimed at helping shield the economy from the global downturn and boost confidence undermined by the Islamist militant attacks on financial hub Mumbai, analysts said.
Economists have warned of a chill effect on the economy.
"Short-term sentiment has been rocked," said Deepak Lalwani, India director of Astaire and Partners in London.
Commerce Secretary GK Pillai said the stimulus package prepared in consultation with the central bank would be "substantial" but would not reveal details, saying, "Let the prime minister announce it tomorrow (Saturday)".
The government package is expected to contain measures to boost infrastructure spending, help the hard-hit vehicle industry and provide interest rate subsidies for export sectors.
Announcement of the stimulus moves would come a week after the end of the 60-hour siege in Mumbai in which gunmen attacked two luxury hotels, a popular cafe, a railway station and a Jewish centre.
Prime Minister Manmohan Singh, a respected economist who opened up India to foreign investors when finance minister in the 1990s, has taken over the portfolio again after naming Finance Minister Palaniappan Chidambaram home minister to bolster security.
Singh this week forecast growth of 7.5 per cent for the year to March 2009. But economists say it could be as low as 6.8 per cent this year and 5.5 per cent the following year.
"Companies across sectors have begun announcing plant shutdowns and delays in project implementation," financial house Citi said in a report forecasting 6.8 per cent growth this year.
"The negative factors appear to more than offset the possible lagged impact of aggressive monetary easing and lower commodity prices."