Government to announce steps to check impact of global slowdown on India

Our Economic Bureau

New Delhi, Aug 31: Finance minister Yashwant Sinha has said that the government would announce a host of measures in the coming weeks to blunt the impact of global economic slowdown on the Indian economy.

Replying to a brief discussion on supplementary demands of grants in Rajya Sabha on Friday, Mr Sinha also refuted the allegation that financial sector was in a mess. He said: "There is no impending crisis in IDBI" and in case of IFCI, the crisis was only "temporary". The Rs 1000-crore bailout package would enable the IFCI to overcome the problems, he added.

The supplementary demands for grants, which was returned by the Upper House, provides for Rs 400 crore for IFCI’s bailout package. The remaining Rs 600 crore is to be provided by the IFCI shareholders which include IDBI, LIC and SBI.

On the issue of economic slowdown, Mr Sinha said that it was peculiar not only to India. The entire world was undergoing through the slowdown phase. The international scenario was "quite depressing" and hopefully the revival was expected from the first or second quarter of next year, he said.

The finance minister said that the government was committed to pushing up public investment, particularly in rural and agricultural sector to kick start the economy.

The 58,000 crore golden quadrilateral highway project was a step in that direction. Besides, Rs 5,000 crore had been earmarked for rural roads, he added.

Voicing concern over the mounting fiscal deficit, Mr Sinha said what was more worrying was the mounting revenue deficit. This would be tackled by having stringent and strictest control over consumption and non-plan expenditure of the government. But there would be no dearth of funds for plan expenditure, he added.

Agreeing with Opposition members regarding the fall in savings rate in the country, Mr Sinha said what was more worrying was the drop in savings by corporates and public sector.

In the Tenth Plan, government proposed to step investment to 32 per cent of GDP and savings rate to over 29 per cent of the GDP to move on to eight per cent annual growth rate.

Though several developing and developed economies had been hit hard by the global economic slowdown, India and China have been singled out for their performance. Even the five per cent growth by India has been considered good in that scenario, he added.

Referring to the issue of Madhavpura Mercantile Cooperative Bank, Mr Sinha made it clear that Centre has not provided any money for the Rs 800 crore bailout package and it was being taken care of, entirely by the state cooperative banks.

Also he said the crisis was not due to inefficiency or malfunctioning of the cooperative bank but due to a "criminal fraud." In case of IFCI, Mr Sinha said the problem was due to a "mismatch" in resources as it resorted to short-term loans to fulfill its long-term lending.

Mr Sinha further said that the government was monitoring performance of financial institutions and banks on a regular basis.