The country’s monetary authorities now have more elbow room to cut interest rates.
The benchmark inflation rate fell to 6.84 per cent from 8 per cent in data released on Thursday, aiding policy makers groping for options to boost fiscal spending and stimuli to boost up the economy from a slowdown. Increasingly benign global oil prices may also help the government perk up its big push.
Macroeconomic managers are giving final touches to a new fiscal package that is likely to be announced next week but such stimulants carry the risk of leaving a bigger hole in the government’s books in the current fiscal year.
The government had budgeted a central fiscal deficit of 2.5 per cent of the gross domestic product (GDP) in 2008-09.
“The trend is clear for falling inflation and this will translate into lower interest rate...RBI must be keeping a watch and take steps if necessary,” said Economic Affairs Secretary in the Finance Ministry, Ashok Chawla.
Earlier this month the government cut prices of petrol and diesel by Rs 5 and Rs 2 per litre respectively., reversing an earlier decision to raise prices that was done to protect state-owned oil firms from suffering losses on account of high crude oil prices. Crude prices hit an all time high of over $147 in July before beginning to decline sharply and is currently ruling at sub-$40 per barrel level.
The government on Thursday sought Parliamentary approval for extra cash expenditure of Rs 42,480 crore to boost the economy in the face of slowdown.
{{/usCountry}}The government on Thursday sought Parliamentary approval for extra cash expenditure of Rs 42,480 crore to boost the economy in the face of slowdown.
{{/usCountry}}The second batch of supplementary demands for grants was tabled in Rajya Sabha barely a fortnight after the government announced a mini-budget of sorts offering across-the-board indirect tax breaks to cut prices of products and boost demand. The demand seeks a gross additional expenditure of Rs 55,604.83 crore, of which the net cash outgo would be Rs 42,480.10 crore.
“RBI should cut interest rate expeditiously and by a significant quantum. It must also ease availability of credit further. Federation of Indian Chambers of Commerce and Industry’s Secretary General Amit Mitra said.