Economic think-tank RIS pitches for $50-bn stimulus package

NEW DELHI: Making a case for bigger and bolder stimulus package, economic think-tank Research and Information System (RIS) has pitched for a Rs 2.5-lakh crore (USD 50 billion) package to boost industry, reeling under the impact of the global financial meltdown.

"I think we need stimulus package of USD 50 billion...the growth momentum is affected due to lack of demand. If you stimulate expenditure, it could revive demand," RIS Director- General Nagesh Kumar said.

He further said that the government should not worry about rising fiscal deficit at this juncture and that a large stimulus package was needed, which could be spread over two financial years.

On the impact of stimulus packages announced by the government in the past, he said, "I think they were desirable but the country needs more sizeable stimulus package."

Kumar, however, sounded positive on economic growth for the country by projecting 7 per cent for 2009-10. Indian economy, according to advance estimates for national income, is expected to grow by 7.1 per cent during 2008-09, down from 9 per cent in the previous fiscal.

"We are doing relatively well, India and China have become new growth poles of the world economy," he added.

To boost the economy following the global financial crisis, the government has come out with three stimulus packages since December.

Kumar's comments came even as Cabinet Secretary K M Chandrasekhar had yesterday said the government's fiscal space is now limited.

"So far as the government is concerned, its fiscal space is limited," Chandrasekhar had said at a CII annual session.

RBI Governor D Subbarao had also warned that another stimulus would have a cost to bear and put pressure on credit markets.

"The country must wait for the impact of the two fiscal stimulus packages to seep into the economic system before any other such measures is considered," he had said.

As part of the first stimulus package announced in December 2008, the government announced an across-the-board excise duty cut of four per cent and an additional public expenditure of Rs 20,000 crore.

Similarly, in January, a fresh stimulus, taking its total revenue loss to Rs 40,000 crore, was unveiled.

Besides, as part of the interim budget, the government also announced excise duty and service tax cut.

Since October, Reserve Bank also took various monetary easing measures by reducing ratios and interest rates to infuse liquidity to the tune of over Rs 4 lakh crore.

However, these stimulus packages have not translated into revival of demand, with the industrial production contracting by 0.5 per cent in January and export also dropped by 16 per cent during the month.