The government’s second economic stimulus package, along with the Reserve Bank of India’s decision to further cut policy rates as well as the cash reserve ratio — the amount which banks have to park with the central bank — is expected to create demand while keeping up the growth momentum.
Economists and industry chambers said that some of the crucial issues relating to infrastructure, exports and small and medium enterprises among others have been addressed, though administrative process ensuring smooth implementation of the same lacks the required focus.
Mahesh Purohit, director, Foundation for Public Economics and Policy Research, said a “reasonable amount of effort has gone in to push forward economic growth.”
“Though exporters have got a boost, there should have been a subsidy and drawback rate for them,” he said, adding that there should have been a further easing of the Cenvat rate.
Talking to Hindustan Times, Chandrajit Banerjee, director general, Confederation of Indian Industry (CII) pointed out that this is a comprehensive package aimed at boosting growth.
“This along with the monetary measures will not only infuse liquidity in the system but also address the issue of cost of credit, which is good for the industry as well as the banks,” Banerjee said.
Industry body FICCI underlined that the sagging business confidence will be restored with the announcement of the package, which is a timely follow up on the initiatives taken by the government.
“It is now important for banks to come out and on lend to corporates rather than invest money in government securities as they have been doing earlier,” said Amit Mitra, secretary general, FICCI, commenting on the reduction in policy rates by RBI.