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Centre working on fresh stimulus package

NEW DELHI: The Central Government is working on a fresh stimulus package in tandem with the Reserve Bank of India (RBI) to help various sectors of the economy in tiding over the slowdown owing to the liquidity crunch in the wake of the global financial crisis.

A day after Prime Minister Manmohan Singh’s review meeting with his apex group of key economic ministry colleagues, RBI Governor D. Subbarao on Tuesday had a follow-up meeting with Finance Minister P. Chidambaram in which Confederation of Indian Industry President and ICICI Bank CEO K. V. Kamath was also called in to provide the industry perspective on the current scenario.

Emerging from the meeting in North Block, Dr. Subbarao told newspersons that the RBI was constantly monitoring the liquidity situation and a decision on its future course of action on interest rates would be taken at an appropriate time. “We are hearing what everyone is saying and the decision will be taken at an appropriate time,” he said when asked whether further rate cuts were in the offing.

Evidently, the discussions at the meeting veered round the current liquidity situation in the country’s banking system and the credit needs of various sectors of the industry and consumers at affordable rates. Providing the industry as well as the bankers’ perspective was Mr. Kamath.

Asked if a further cut in interest (lending) rates by banks was coming any time soon, Mr. Kamath noted that it was a “play of demand and supply” of funds.

“Nobody has asked us to cut interest rates. I am among the first to say that interest rates have to decline... Confidence in business has to come back,” he said. However, it was quite evident from Commerce Minister Kamal Nath’s statement on Monday that the RBI would look at fresh measures to infuse more funds into the cash-strapped banking system.

After participating in the review meeting chaired by the Prime Minister on tackling the global meltdown, he had said: “The meeting considered certain steps and the RBI will look at them...Various methods of injecting liquidity through the repo and reverse repo (short-term) rates were discussed.”

The meeting was also attended by Mr. Chidambaram, Planning Commission Deputy Chairman Montek Singh Ahluwalia and the RBI Governor.

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