New govt will have a tough ask at hand
Finance Minister Pranab Mukherjee said there has been a severe choking of credit since then and a global crash in stock markets, reports HT Correspondent.india Updated: Feb 17, 2009 00:01 IST
The piling rubble of the global economic meltdown has shaved off the broader economy’s growth by a worrisome two percentage points, and the next government might have to dig deep into the public coffers to sustain the economy on a high growth trajectory.
Finance Minister Pranab Mukherjee said there has been a severe choking of credit since then and a global crash in stock markets.
“Most emerging market economies have slowed down significantly. India, too, has been affected. For the first nine months of the current year, the growth rate of exports has come down to 17.1 per cent.”
The new government will have to roll out new measures, but a yawning fiscal deficit will curb the elbowroom to spend its way out of the slowdown.
The two packages announced in December and January, provide tax relief to boost demand and aim at increasing expenditure on public projects to create employment and public assets.
“Depending on the response of the domestic economy and the revival of the global economy, there may be a need to consider additional fiscal measures when the regular budget is presented by the new government after the elections,” Mukherjee said.
The global financial crisis has also threatened to dampen global FDI flows and India is set to miss the $35 billion target for this year.
India registered 17 per cent increase in FDI inflows last year. The recent changes announced in the policy, simplifying the calculation of indirect and direct foreign investment, would give more elbow room for Indian promoter firms to raise more foreign funds.
In spite of the global financial crisis India received FDI worth $23.3billion during April to November 2008, but latest figures show a slowdown.
“To provide an impetus to foreign investment in India, guidelines are being further simplified.”