Robust industrial output for the month of November reiterated the story of India’s rapid bounce-back from the global financial crisis. Now with the economy perceived to firmly back on the recovery track, the government has run into another problem: when to withdraw the stimulus that it had, together with the RBI, induced into the economy to boost growth.
As part of monetary and fiscal stimulus, the government and RBI — in late 2008 and early 2009 — cut interest rates, pumped in more money, encouraged bank lending, cut excise duty and provided incentives to stimulate demand in ailing sectors such as real estate, exports, IT and textile.
However, with the prospect of more growth comes higher inflation and the RBI has said it was considering the thought of reining in some liquidity to control rising prices especially of food items.
“The IIP figures were good,” said Cabinet Secretary KM Chandrasekhar, referring to the 11.7% growth in industrial output seen in November. He added he expected the growth to sustain ahead. On the issue of stimulus exit, the secretary said a decision would be taken “at an appropriate time.”
Commerce Minister Anand Sharma who backed the textile ministry to the hilt when it faced rough weathers urged the government to be cautious and called for a “calibrated sectoral approach towards removal of stimulus.”
Sharma said he had requested Finance Minister Pranab Mukherjee to reduce interest rates on dollar credit and ensure interest subsidy of 2% for labour-intensive industries.
Source: Moneycontrol.comCourtesy moneycontrol.com
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