CII tells govt to pump in more money
The Financial Express – Corporates & Markets, April 1, 2009, P VIII
fe Bureau, New Delhi
The Confederation of Indian Industry (CII) on Tuesday urged the government to print more currency notes to bridge the fiscal deficit and keep the economy afloat, which is reeling under the impact of the global financial meltdown.
“If the government is going to borrow from the market to fill the fiscal deficit, then they are going to suck up all the money available in the banks and we will be drained out,” new CII president Venu Srinivasan told reporters at his maiden press conference.
Pitching for monetisation of the Budget deficit, he said, “It means printing notes. Which means you have the risk of increasing inflation but at the same time you will keep the economy afloat.” Srinivasan further said that the government should also amend the Fiscal Responsibility and Budget Management Act, which imposes restrictions on public expenditure.
Raising concerns over the government’s decision to raise an additional Rs 300,000 crore during 2009-10 to fund public expenditure, the CII president said that very little money would be left for the private sector.
Adding off-budget items and state deficits, total government deficit is likely to be in excess of 10% of the GDP, he said, adding revenue deficit accounts for over 70% of the fiscal deficit.
Asked whether monetisation would help or not, Srinivasan said, “Otherwise, with such a high level of deficit, you will find investments drying up in the country.”
He also said that the government should further reduce key interest rates like repo (short-term lending rate) and reverse repo rates. “There is need to reduce repo and reverse repo rates by 50 basis points,” he added.
He said that at the current rates several projects are still not viable.
While ruling out any possibility about the country slipping into deflation, Srinivasan said that the government should not publish the inflation data weekly.
“High borrowing is keeping interest rates from falling in line with inflation,” he said.
Suggesting more fiscal measures, he said that the government should further ease the indirect taxes – excise, service tax for specific sectors.
He also said that to avoid injury to the domestic industry owing to artificially low-priced imports, an aggressive safeguard mechanism needs to be in place.
“This could be supplemented by strengthening anti-dumping directorate,” he said.
To deal with the land acquisition issues to stimulate the manufacturing sector, he said that the government should acquire land systematically and transfer it to industry in a transparent manner.
The Financial Express – Corporates & Markets, April 1, 2009, P VIII
fe Bureau, New Delhi
The Confederation of Indian Industry (CII) on Tuesday urged the government to print more currency notes to bridge the fiscal deficit and keep the economy afloat, which is reeling under the impact of the global financial meltdown.
“If the government is going to borrow from the market to fill the fiscal deficit, then they are going to suck up all the money available in the banks and we will be drained out,” new CII president Venu Srinivasan told reporters at his maiden press conference.
Pitching for monetisation of the Budget deficit, he said, “It means printing notes. Which means you have the risk of increasing inflation but at the same time you will keep the economy afloat.” Srinivasan further said that the government should also amend the Fiscal Responsibility and Budget Management Act, which imposes restrictions on public expenditure.
Raising concerns over the government’s decision to raise an additional Rs 300,000 crore during 2009-10 to fund public expenditure, the CII president said that very little money would be left for the private sector.
Adding off-budget items and state deficits, total government deficit is likely to be in excess of 10% of the GDP, he said, adding revenue deficit accounts for over 70% of the fiscal deficit.
Asked whether monetisation would help or not, Srinivasan said, “Otherwise, with such a high level of deficit, you will find investments drying up in the country.”
He also said that the government should further reduce key interest rates like repo (short-term lending rate) and reverse repo rates. “There is need to reduce repo and reverse repo rates by 50 basis points,” he added.
He said that at the current rates several projects are still not viable.
While ruling out any possibility about the country slipping into deflation, Srinivasan said that the government should not publish the inflation data weekly.
“High borrowing is keeping interest rates from falling in line with inflation,” he said.
Suggesting more fiscal measures, he said that the government should further ease the indirect taxes – excise, service tax for specific sectors.
He also said that to avoid injury to the domestic industry owing to artificially low-priced imports, an aggressive safeguard mechanism needs to be in place.
“This could be supplemented by strengthening anti-dumping directorate,” he said.
To deal with the land acquisition issues to stimulate the manufacturing sector, he said that the government should acquire land systematically and transfer it to industry in a transparent manner.
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