Montek meets PM on second stimulus package

Written by Economy Bureau | New Delhi | Updated: Dec 31 2008, 07:00am hrs
In the runup to the second fiscal and monetary stimulus package expected to be announced soon, deputy chairperson of the Planning Commission Montek Singh Ahluwalia met Prime Minister Manmohan Singh at his residence on Tuesday. While the meeting was still on at the time of going to press, it assumes significance as it comes a day after the PM met Reserve Bank of India governor Duvvuri Subbarao to push for a cut in key bank rates in the light of inflation going down rapidly.

The monetary policy measures on the cards includes an aggressive 100-150 basis points cut in the cash reserve ratio, repo rate and the reverse repo rate. As part of the first stimulus package announced on December 6, the RBI had cut the repo rate and the reverse repo rate by 100 bps each. The reverse repo rate now stands at 5% and the repo rate at 6.5%. The cut in reverse repo rate was expected to force banks to go out and lend. But with ten-year government bond yields dipping to as low as 5.6% in recent days, the reverse repo has again become banks optimum.