Monday, January 19, 2009

Economic Woes To Persist In Next Fiscal - Jan 19, 2009

Prime Minister Manmohan Singh said the country through the next fiscal will have to live with economic woes because the policy measures of the government cannot fully insulate the domestic economy from the impact of the global downturn. "Growth in the current year will be lower than the last year and our problems will not be over in the current year. The difficult period will continue into 2009-10", Singh said at a function in Mumbai.

However, the Prime Minister said that the easing of inflation has given monetary flexibility to deal with the difficult economic environment. Fortunately the rate of inflation has eased considerably and is now 5.2 per cent and is expected to decline further. This gives ample flexibility for monetary policy. He said that next year as well the government would have to continue with the supporting the environment.

However, the Prime Minister said that in the wake of the growing fiscal deficit, the government has limited space for providing more tax cuts even though it (the government) has to "tolerate" it for the next year to accommodate the expenditure needed for stimulating the economy. The Prime Minister said estimates of GDP growth for the current fiscal vary between 6.5 and 7 per cent.

He also added "Our government has also taken a number of steps to counter the global downturn. We are encouraging the banks, especially the public sector banks, to lend more freely to help otherwise viable production units to cope with the temporary stress of the economic downturn,". The government and the Reserve Bank have announced measures including interest rate cuts and across-the-board reduction in excise duty to boost demand. Besides this, the exporters as well as the small-scale industries have been given packages - fiscal and monetary.

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