Global crisis impacts India; do everything to push growth:PM

New Delhi, Nov 3 (PTI) Prime Minister Manmohan Singh Monday said the global crisis had impacted corporates, banks and investor sentiment, but assured that the banking system and deposits were safe and the government would take more steps to protect economic growth.

"A crisis of this magnitude was bound to affect our
economy and it has. International credit has shrunk with
adverse effects on our corporates and banks. Global
uncertainty is also tending to dampen investor sentiment," he
said during a meeting with India Inc to review the state of
the economy in the face of the global meltdown.

He asked industry to refrain from any "knee-jerk"
reaction such as large-scale layoffs, which might lead to a
negative spiral, and said "industry must bear in mind its
societal obligations in coping with the effects of this global
crisis", which the Prime Minister felt "is now likely to be
more severe and prolonged".

"Our first priority was to protect the Indian
financial system from possible loss of confidence or contagion
effect ... the situation is abnormal and we need to be
constantly on the alert. The situation is being watched on a
day to day basis and more steps will be taken if required."

The meeting was attended, among others, by Ratan Tata,
Mukesh Ambani, K.V. Kamath, Shashi Ruia, Deepak Parekh, K.P.
Singh, where Finance Minister P. Chidambaram, R.B.I. Governor
D. Subbarao and Planning Commission Deputy Chairman Montek
Singh Ahluwalia represented the government.

Singh said additional liquidity and reduction in repo
rate will help to "provide credit at reasonable rates".

He said, "The government will take necessary monetary
and fiscal policy measures on the domestic front to protect
our growth rates," adding that India will also seek reform of
international financial institutions to prevent recurrence of
such crisis.

The Prime Minister said that Indian "banks are well
regulated and also well capitalised. I think we have
successfully conveyed to our people that our banking system,
both in the public and private sector, is safe, and the
government stands behind it and that no one should fear for
the safety of bank deposits."

Detailing the several measures taken to infuse liquidity
into the system to ensure adequate flow of credit, he said, "I
believe these steps have made a substantial difference. We
recognize that the situation is abnormal and we need to be
constantly on the alert. The situation is being watched on a
day-to-day basis and more steps will be taken if required."

Singh exuded confidence that the country's financial
system would be stable and function well following recent
measures, while adding that the negative impact on the real
economy needs to be minimised.

"The public sector banks have been instructed to ensure
that they act counter cyclically in this situation to counter
the general erosion of confidence," he said.

Singh further told the industry leaders that the
government was able to "act more boldly" because its efforts
to contain inflation have begun to be effective.

Pointing out that expanding investment in infrastructure
can play an important counter cyclical role in the current
situation, he said, "We will review projects and programmes
in the area of infrastructure development, including both
pure public sector projects and public private partnership
projects, to ensure that their implementation is expedited
and they do not suffer from constraints of funds."

Inviting the industry to join government's effort to
convert this global crisis into an opportunity for India, the
Prime Minister said that the country's high savings and
investment rates have been a great strength in the recent past
and "we hope that the Indian corporate sector will not let the
global crisis shake its confidence."

"While every effort needs to be made to cut costs and
raise productivity, I hope there will be no knee jerk reaction
such as large scale lay-offs which may lead to a negative
spiral... Government and industry must act in a true spirit of
partnership to meet the challenges that lie ahead."
While promising all necessary measures on domestic front,
Singh said, "On the international front, we are working
closely with other countries to ensure coordinated policy
action and increased development cooperation for the
containment of this crisis." PTI B.J.