Admitting the effects of the turmoil in international financial markets will continue into this year as well, the government on Wednesday said the economy is expected to grow 6.5-7% in 2009-10. This is because the measures taken to boost the sagging economy would take time to show effects on the ground.
While the Centre and Reserve Bank of India have taken various measures to insulate the economy from further slowdown, but the impact would be seen after some time. Minister of state for industry Ashwani Kumar said 2009-10 will be a ?difficult? year and the growth rate would not be over 7%.
India?s economy has grown at 9% for the last three fiscal, the ongoing global slowdown has hit the economy, which is now expected to grow at about 7% in 2008-09.
?With what is going on, we would not be able to achieve a growth rate of 8-9%. It would be around 6.5-7% in the next year. We are trying to kickstart the economy by spending more on infrastructure. We would spend Rs 1 lakh crore in the next 100 days to create infrastructure,” Kumar told reporters on the sidelines of Indo-American Economic Summit 2009 here.
?Our main priority is to prevent job losses and we are working on it. There would be certain job losses in certain sectors of the industry, but in certain other sectors there might not be job losses. In fact, there might be expansion in those areas,” Kumar said.
Shrinking industrial production and exports have led to job losses mainly in labour intensive sectors like textiles & apparel and gems & jewellery. Federation of Indian Export Organisations (Fieo) has projected that by the end of 2008-09, almost 1 crore people would lose jobs.
But disagreeing with the Fieo?s assessment, Kumar said, ?I don?t think that is a realistic figure at all.” However, the government would give ?all possible? help to the job-oriented sectors. Asked whether the government proposes to bring out any more stimulus package, Kumar said the government has already given major sops. ?But if there are certain sectoral issues, that will be discussed,” he said.
On January 2, the government announced the second stimulus package within 30-days to inject fresh capital in banks, ease overseas borrowings and increase expenditure on infrastructure projects. RBI also reduced key rates to increase liquidity into the system and encourage banks to lend more. Since October 20, RBI has cut repo rate (the rate at the central bank lends to commercial banks) by 3.5% to 5.5%, reverse repo rate (the rate at which banks lend to RBI) by 2% to 4%, and cash reserve ratio (the proportion of deposits banks have to maintain as reserve) by 4% to 5%.
Ripple effect
• India?s economy has grown at 9% for the last three fiscal
• The government would spend Rs 1 lakh crore in the next 100 days to create infrastructure
• Shrinking industrial production and exports have led to job losses
• Federation of Indian Export Organisations has projected that by the end of 2008-09, almost 1 cr people would lose jobs