More stimulus packages not good for economy: CII President
Stressing fiscal responsibility on the part of the Government, industry body CII has said more stimulus packages will affect the economy adversely rather than help it.
By PTI |
NEW DELHI: Stressing fiscal responsibility on the part of the Government, industry body CII has said more stimulus packages will affect the economy adversely rather than help it.
"Any more stimulus package will create problems. We are not asking for (a) fiscal package," President of the Confederation of Indian Industry Venu Srinivasan told media.
Srinivasan, who took over as CII President last week, said the Indian economy remained stable despite serious problems in most of the developed world. "We have stabilised at six per cent growth, which is not bad given the world economic situation ... I don't think the government should artificially stimulate it to 8-9 per cent," he said.
Srinivasan, who heads TVS Motor Company Ltd, the country's third-largest motorcycle maker, said it is time the government got back to fiscal responsibility and bring down the budget deficit.
With the deepening global financial crisis crippling industrial production, the government not only lost tax revenue but also had to give three stimulus packages in the fiscal 2008-09. As a result, the fiscal deficit ballooned to six per cent of GDP against the target of a mere 2.5 per cent.
Conscious that new stimulus packages would exert more pressure on government finances, the CII would like the Reserve Bank to signal cuts in interest rates.
"Partly due to global crisis, we have reached a very high level of fiscal deficit. Including state (deficit) and off balance sheet items like bonds and loan writeoffs, the fiscal deficit (would be) at 11-12 per cent of GDP and this is not sustainable ...," the CII chief said.
He said if the high deficit continues for two-three years, the interest service cost of the country would go up. "You (government) will suck out all cash and crowd out infrastructure investment and ... private investment," he said.
However, industry wants interest rates to come down. "We don't expect a fiscal stimulus package but we are definitely talking about monetary intervention in terms of interest rate cuts," Srinivasan said.
In his meeting with industry leaders on March 28, Prime Minister Manmohan Singh hinted at the possibility of the Reserve Bank signalling further cuts in interest rates. "With ample liquidity and low inflation, there is scope perhaps for a further moderation in interest rates," Singh had said.
While inflation is very low, the prime lending rates of most of the banks remain above 10 per cent.
"Any more stimulus package will create problems. We are not asking for (a) fiscal package," President of the Confederation of Indian Industry Venu Srinivasan told media.
Srinivasan, who took over as CII President last week, said the Indian economy remained stable despite serious problems in most of the developed world. "We have stabilised at six per cent growth, which is not bad given the world economic situation ... I don't think the government should artificially stimulate it to 8-9 per cent," he said.
Srinivasan, who heads TVS Motor Company Ltd, the country's third-largest motorcycle maker, said it is time the government got back to fiscal responsibility and bring down the budget deficit.
With the deepening global financial crisis crippling industrial production, the government not only lost tax revenue but also had to give three stimulus packages in the fiscal 2008-09. As a result, the fiscal deficit ballooned to six per cent of GDP against the target of a mere 2.5 per cent.
Conscious that new stimulus packages would exert more pressure on government finances, the CII would like the Reserve Bank to signal cuts in interest rates.
ADVERTISEMENT
"Partly due to global crisis, we have reached a very high level of fiscal deficit. Including state (deficit) and off balance sheet items like bonds and loan writeoffs, the fiscal deficit (would be) at 11-12 per cent of GDP and this is not sustainable ...," the CII chief said.
He said if the high deficit continues for two-three years, the interest service cost of the country would go up. "You (government) will suck out all cash and crowd out infrastructure investment and ... private investment," he said.
However, industry wants interest rates to come down. "We don't expect a fiscal stimulus package but we are definitely talking about monetary intervention in terms of interest rate cuts," Srinivasan said.
In his meeting with industry leaders on March 28, Prime Minister Manmohan Singh hinted at the possibility of the Reserve Bank signalling further cuts in interest rates. "With ample liquidity and low inflation, there is scope perhaps for a further moderation in interest rates," Singh had said.
ADVERTISEMENT
While inflation is very low, the prime lending rates of most of the banks remain above 10 per cent.
Download
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
ADVERTISEMENT
