Without doubt, the economy is facing its worst multi-sector slowdown ever. It is not just India but economies across the world that are caught in the deluge of the meltdown.
Ever since the US, Japan and China pushed through their formulas to kickstart the economy, policy makers in India have been debating the content and magnitude of a stimulus package that is required.
Last week, the finance ministry finally unveiled a bonsai version. The central theme is to get momentum into the economy.
So CENVAT has been cut by 4 per cent, infrastructure spending ramped up by Rs 20,000 crore, exporters offered more credit and PSU banks will come up with a package for low-cost (Rs 5-20 lakh) housing.
The expectation: cheaper goods would get the middle class to spend, expenditure on infrastructure would spur demand for steel and cement and low-cost housing could prime the economy besides creating jobs. The size of the package: Rs 30,000 crore or just over $6 billion.
Reactions have been mixed. Auto and consumer goods makers are happy while others are not so pleased. Hindustan Motors MD Ravi Santhanam says most car makers have passed on the excise benefit to consumers. Ganesh Gupta, president of the Federation of Indian Export Organisations says additional liquidity will help SMEs but is unlikely to help reach the $200-billion export target.
Steel and cement makers see it as a relief but as Assocham president Sajjan Jindal says, a broader package would have helped “infrastructure projects that are on hold because of the liquidity crunch”.
He expected the package to be worth Rs 70,000 crore. His view finds echoes. The consensus is that the package is too small to combat the slowdown. CII chief and ICICI MD K.V. Kamath puts it in perspective. “A package targeting 2 per cent of the GDP, approximately Rs 100,000 crore (or $20 billion) would have been a real booster.” Obviously, the Government is on a learning curve.
Source : India Today.in