The Centre is planning to use the vote on accounts, scheduled for second week of February, to unleash another round of fiscal measures. This would be in addition to the interest rate cuts that commerce & industry minister Kamal Nath said was possible soon.
Claiming that concerns about inflation have been addressed and that prices are expected to soften further, Nath on Monday said at the sidelines of a CII conference, ?Falling inflation obviously leads to a cut in interest rates.? He said there is room for greater liquidity. ?RBI will certainly consider this and devise a commensurate policy.?
The proposed fiscal steps will have to do until July, which is the earliest a new government will be able to present a general Budget. When it announced its second stimulus package on January 2, the Centre had said there would not be any fresh expenditure or fiscal steps in 2008-09.
But the vote on accounts for 2009-10 is expected to allocate more funds to various sectors to ensure elections do not interrupt the growth momentum. The vote on accounts is likely to see a significant hike in both plan and non-plan expenditure.
Indicating that the Centre is hopeful of economic growth remaining firm, petroleum secretary RS Pandey said, ?The economy continues to grow at over 7% and so we expect demand for petroleum products to (grow) 6% this year and around the same levels even next year.? He said crude oil imports would rise in 2009-10.
RBI is scheduled to announce a review of monetary policy on January 27. As part of the second stimulus package, the central bank had cut the repo rate by 100 basis points to 5.5%, the reverse repo rate by 100 bps to 4% and CRR from 5.5% to 5%. Thanks to these steps, credit to the commercial sector improved marginally to Rs 11,961 crore for the fortnight ended January 2, RBI data reveals. Non-food credit had shrunk by Rs 1,157 crore in December.
Kamal Nath will be holding fresh discussions with exporters and different sections of industry on Wednesday. ?More stimulus measures may happen after January 31,? he said. The government had in December, and again earlier this month, announced stimulus packages to help India Inc. But sectors such as real estate, exports and consumer durables continue to see a decline in demand.
Keeping this in mind, the UPA government is expected to give a big push to infrastructure projects, particularly under the PPP model. ?India?s exclusive government-owned infrastructure finance company is being armed to bankroll all additional infrastructure projects of $15 billion over the next 18 months,? Nath said.