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Industry demands stimulus package

business Updated: Aug 08, 2011 23:11 IST
New Delhi

Worried over the fallout of the US debt problems on the Indian economy, industry on Monday demanded another stimulus package to boost domestic demand and investments amidst signs of slowdown in industrial growth.

While Assocham called for another stimulus package, Ficci said there is a need for better fiscal management and acclerating structural reforms.

"A slow pace of recovery in the US could also prompt hard hit sectors in India to call for another stimulus package by the government to boost investments and demand," Assocham secretary general DS Rawat said.

In sync with the global stimulus, the Indian government too had provided tax sops of Rs 1.86 lakh crore following 2008-09 crisis.

"There was a need for better fiscal management and accelerating structural reforms," Ficci said.

Before making the demand for the stimulus, the industry read a cue in finance minister Pranab Mukherjee's statement.

"We would focus on encouraging greater domestic consumption and give an impetus to the drivers of domestic growth," the finance minister said earlier in the day.

There was also a demand for a pause in the interest rate hikes, being effected by the Reserve Bank since March 2010.

The country's largest real estate consultant Jones Lang LaSalle said, however, commodity prices may come down and this will help curb inflation.

"Under the circumstances, the Indian business lobby may now be able to make a stronger and potentially successful case against further interest rate hikes with the RBI," Jones Lang LaSalle India chairman and country head Anuj Puri said.

Assocham secretary general DS Rawat said, the downgrade of the US soverign credit could also affect the country's exports to the world's largest market.

Echoing Assocham, Ficci said an uncertain global environment could depress India's exports of goods and services to the American market.

India's merchandise exports to the US in 2010-11 made up for 13% of its merchandise exports of $246 billion. Besides, 60% of the country's software exports of $59 billion during that period were destined to the US.

However, chambers exuded confidence about achieving the country's growth target of eight% in the current fiscal as the country has high savings, investments and a buoyant domestic demand.

"GDP projections for the 2011-12 fiscal continue to be in the realm of near about 8%, despite the instability created by euro zone debt problems and downgrade of the US debt," Ficci said.

It added, the impact of downgrade rating would be short-term in terms of market uncertainties.

The BSE Sensex, which saw a fall of 546 points in early trade, closed at a 14-month low of 16,990 points on lowering of sovereign rating of US by Standard and Poor's to AA+ from AAA (the highest rating) and fears of "double dip" recession hitting the world's largest economy.