Government reaching limits on giving growth promoting stimulus: Raghuram Rajan

NEW DELHI: Maintaining that government is reaching the limits on providing fiscal or monetary stimulus, Chief Economic Adviser Raghuram Rajan today said the need of the hour was to improve investor confidence and create better environment for achieving sustainable growth.

"After the initial policy burst in the immediate wake of crisis, stimulus both on the fiscal side and on the monetary side, we ourselves in India are reaching the limits of stimulus and we must contemplate ways of generating sustainable growth again," he said while addressing the 'Delhi Economics Conclave' here.

The government had doled out large fiscal stimulus in the aftermath of the 2008 global financial meltdown to arrest the economic downturn.

"We need to do is we have to keep doing what we have been doing and create a better environment for growth. I think growth will follow," Rajan said, adding, the recent steps taken by the government should improve investor confidence and create conditions for sustainable growth.

In the past couple of months the government has taken a host of reform measures and has also relaxed foreign direct investment ( FDI) norms.

Besides, the Cabinet yesterday cleared setting up of Cabinet Committee on Investment and the long pending Land Acquisition Bill.

Rajan further said that there were signs of stabilising economic growth with rapid bounce back in IIP to 8.2 per cent in October against a 5 per cent contraction in the corresponding month last year.

"Stabilisation is not enough, we need to grow faster. So hopefully some of the measures government has taken will start paying off...the job of fighting inflation directly through monetary policy is of RBI's. They will do what they need to do," he said.