Govt review says stimulus packages spurred growth
The Financial Express, April 29, 2009, Page 1
Economy Bureau, New Delhi
Stock taking by the government of its three stimulus packages shows they have nudged up GDP growth, but officials said they would reserve final assessment on the impact until industrial output figures for March come through by early May.
Cabinet secretary KM Chandrasekhar, the country’s senior-most civil servant, met the secretaries of finance, commerce, industry and micro, small & medium enterprises (MSME) to evaluate the implementation of various fiscal measures announced since December. The meeting also reviewed the impact of various rate cuts announced by RBI.
The central bank has estimated the combined value add of the fiscal stimulus packages—including a 4% cut in central excise and 2% in service tax—along with the rate cuts at 3% of GDP. The centre and RBI have between them released Rs 4.62 lakh crore into the economy. Emerging from the secretary-level meeting a senior official said, “Progress and issues related to implementation of various measures were discussed. The meeting also took note of bankers reducing lending rates.”
The index of industrial production fell by 1.2% in February—a 15-year low. IIP grew at just 2.8% between April 2008 and February 2009, compared with a robust 8.8% in the same period of 2007-08. But Macquarie Research said in a note on Tuesday that India’s industrial production is likely to rebound and may post double-digit growth on the back of the fiscal and monetary measures. “March data will probably post a 10% month-on-month gain,” it said.
Ministry of statistics & programme implementation secretary Pronab Sen told FE, “We don’t know what is happening to investments. While cement consumption is going strong, trade data suggests there is not much growth in machinery and equipment. There is a lot of conflicting data. We are still waiting for the IIP (March) and agriculture (third advance estimates) data to come in, so it is difficult to come out with an estimate for GDP at present.”
Tuesday’s meeting is the latest in a series held by the Chandrasekhar with central officials, state chief secretaries, industry chambers and banks to ascertain the progress of various measures.
RBI has cut repo (the rate at which it lends to commercial banks) by 425 basis points since mid-September, while it reduced reverse repo (the rate which banks park their funds with RBI) by 275 basis points in the same period. However, commercial banks have reduced their prime lending rates by only half as much and industry chambers have been demanding single-digit interest rates.
Banks have lent about Rs 8,500-9,000 crore to the MSME sector as a part of the stimulus packages, said MSME secretary Dinesh Rai at an Assocham function on Tuesday. “Of the Rs 7,000 crore refinance facility extended to Small Industries Development Bank of India, Rs 4,300 crore has already been released to commercial banks,” Rai said.
The Macquarie note said some industries like motor vehicles, cement and steel are already showing signs of increased activity, “though India’s structurally broad industrial base suggests that (industrial production) will need a bit more time for the year-on-year growth rates to be firmly in the black, and rising”.
RBI governor D Subbarao said in Washington on Monday that effective implementation of the stimulus packages was a key challenge. “There are several challenges on the way forward: implementing the fiscal stimulus packages, particularly stepping up public investment; revival of private investment demand; unwinding of fiscal stimulus in an orderly manner; maintaining the flow of credit while ensuring credit quality; preserving financial stability along with provision of adequate liquidity; and ensuring an interest rate environment that supports the return of the economy to a high growth path,” he had said.
The Financial Express, April 29, 2009, Page 1
Economy Bureau, New Delhi
Stock taking by the government of its three stimulus packages shows they have nudged up GDP growth, but officials said they would reserve final assessment on the impact until industrial output figures for March come through by early May.
Cabinet secretary KM Chandrasekhar, the country’s senior-most civil servant, met the secretaries of finance, commerce, industry and micro, small & medium enterprises (MSME) to evaluate the implementation of various fiscal measures announced since December. The meeting also reviewed the impact of various rate cuts announced by RBI.
The central bank has estimated the combined value add of the fiscal stimulus packages—including a 4% cut in central excise and 2% in service tax—along with the rate cuts at 3% of GDP. The centre and RBI have between them released Rs 4.62 lakh crore into the economy. Emerging from the secretary-level meeting a senior official said, “Progress and issues related to implementation of various measures were discussed. The meeting also took note of bankers reducing lending rates.”
The index of industrial production fell by 1.2% in February—a 15-year low. IIP grew at just 2.8% between April 2008 and February 2009, compared with a robust 8.8% in the same period of 2007-08. But Macquarie Research said in a note on Tuesday that India’s industrial production is likely to rebound and may post double-digit growth on the back of the fiscal and monetary measures. “March data will probably post a 10% month-on-month gain,” it said.
Ministry of statistics & programme implementation secretary Pronab Sen told FE, “We don’t know what is happening to investments. While cement consumption is going strong, trade data suggests there is not much growth in machinery and equipment. There is a lot of conflicting data. We are still waiting for the IIP (March) and agriculture (third advance estimates) data to come in, so it is difficult to come out with an estimate for GDP at present.”
Tuesday’s meeting is the latest in a series held by the Chandrasekhar with central officials, state chief secretaries, industry chambers and banks to ascertain the progress of various measures.
RBI has cut repo (the rate at which it lends to commercial banks) by 425 basis points since mid-September, while it reduced reverse repo (the rate which banks park their funds with RBI) by 275 basis points in the same period. However, commercial banks have reduced their prime lending rates by only half as much and industry chambers have been demanding single-digit interest rates.
Banks have lent about Rs 8,500-9,000 crore to the MSME sector as a part of the stimulus packages, said MSME secretary Dinesh Rai at an Assocham function on Tuesday. “Of the Rs 7,000 crore refinance facility extended to Small Industries Development Bank of India, Rs 4,300 crore has already been released to commercial banks,” Rai said.
The Macquarie note said some industries like motor vehicles, cement and steel are already showing signs of increased activity, “though India’s structurally broad industrial base suggests that (industrial production) will need a bit more time for the year-on-year growth rates to be firmly in the black, and rising”.
RBI governor D Subbarao said in Washington on Monday that effective implementation of the stimulus packages was a key challenge. “There are several challenges on the way forward: implementing the fiscal stimulus packages, particularly stepping up public investment; revival of private investment demand; unwinding of fiscal stimulus in an orderly manner; maintaining the flow of credit while ensuring credit quality; preserving financial stability along with provision of adequate liquidity; and ensuring an interest rate environment that supports the return of the economy to a high growth path,” he had said.
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