They told a select press meet that the government was not moving fast enough to create a confidence in the economy. China has cut its rate of interest dramatically but we are still debating substantial cuts, Arun Shourie said. According to him the government should activate the corporate debt restructuring mechanism to help over leveraged firms that are in acute liquidity crisis and devise schemes to help specific sectors recover. This could also include the development of a sovereign wealth fund to lend to corporates.
Shourie said the transmission mechanism of the crisis would otherwise create major job losses in the real sector, accompanied by the closure of several units that in turn would create pressure on the banking sector whose non performing assets would mount. He said the government must move to arrest the liquidity crisis in sectors which were the most affected from the current crisis including exports, import intensive industries and the construction sectors.
The three of them were categorical that the Indian crisis was building up well before the present situation erupted. The underfunded subsidies and the pushing of expenditure has pushed the actual fiscal deficit to such an alarming level that there is no space for additional public expenditure, Sinha added. He said the government at this juncture should have invested in public infrastructure, like spurring the national highways project and airports to spur internal demand. But that was difficult with an overhang of a large fiscal deficit.
There is almost a criminal determination not to do anything, Shourie said. Even on the market meltdown, the BJP leaders claimed that they had drawn attention to P-notes being used to anonymously take money out of the country and that shortselling was being used to force down valuations of Indian industry. Weeks have gone by. Other countries, even conservative governments like Japan, have acted to plug misuse of such devices. Our government has doggedly refused to do so a statement issued by the three leaders said.
Insinuating collusion, the BJP trio maintained that while the finance minister and the Prime Minister had dismissed calls for action, they had kept the loopholes open for speculators to play the markets.