ID :
30582
Mon, 11/17/2008 - 09:57
Auther :
Shortlink :
http://m.oananews.org//node/30582
The shortlink copeid
Govt to aggressively use monetary, fiscal policies: PM
V.S. Chandrasekar
On Board PM's Special Aircraft, Nov 16 (PTI) Confident that inflation will come down further, Prime Minister Manmohan Singh on Sunday gave firm indications that monetary and fiscal policies would be used aggressively in relation to interest rates.
About the prices of petroleum products, the Prime
Minister gave no firm commitment that they would be reduced in
the light of the fall of international crude prices from a
peak of U.S.D. 147 to about U.S.D. 56, but said "all options"
were open on the question of reducing fuel prices.
"As far as the interest rates are concerned that is the
prerogative of the R.B.I. It will not not be proper for me to
comment. But as I said it is an evolving situation.
"If the inflation rate comes down and we feel confident
that inflation will not not be a problem, there is scope for
manoeuvrability both in more aggressive use of monetary policy
and more aggressive use of fiscal policy," he told journalists
accompanying him in his special plane on the way back from
Washington where he attended a summit of G-20 leaders on the
current global financial crisis.
The Prime Minister was replying to a question on the
possibility of reducing interest rates in the context of
easing liquidity situation to tackle the economic crisis.
Singh said as far as India was concerned a stimulus
package was already on and steps have been taken for ensuring
increased liquidity. "If more is needed we will do more," he
added.
To a question on the possibility of reducing petroleum
products' prices as part of a stimulus package to create more
demand in the wake of recessionary trends and in the context
of the steep decline in the international crude price, Singh
said "we will look at all options. We still have a
considerable deficit on the oil account. It is an evolving
situation."
Asked if a fiscal stimulus package could be expected from
the R.B.I., he said he did not not think that it was a once
and for all process.
"We are keeping the situation under review on a
day-to-day basis. The R.B.I. is at it, the Finance Ministry is
at it. I am heading a committee that includes the Finance
Minister and the Commerce Minister.
"So whatever is needed to keep the economy on an even
keel will be done. Fortunately now the inflation has become
less of a problem. If you look at inflation from a different
angle, the data emerging is turning out to be much better on
the inflation front than is evident. That will give us the
manoeuvrability to deal with the economic situation," he said.
Maintaining that a fiscal stimulus plan is already on in
India, the Prime Minister said he did not not want to take
credit but he and the Finance Minister had anticipated that
there was likely to be a global slowdown this year.
And while preparing for the budget this year, he said the
government had at that time said it had taken excessive risk
about the budget deficit.
"But conscious of the fact that a global slowdown was on
the horizon, we had budgeted for a very substantial amount of
deficit precisely to take care of the slack that may emerge.
So far as our economy is concerned the fiscal stimulus is
already on," Singh said.
"The fact is we had given record prices to the
producers of rice and wheat and Rs 71,000 crore of loans were
written off. We have a very extensive social service expansion
and infrastructure expansion," the Prime Minister said.
On the summit in Washington, Singh said there was one
important significance which is clear that the balance of
power is shifting increasingly in favour of emerging
economies.
"We were previously also invited for the past couple
of years for the G-8 meetings. But consultations were merely
for the sake of form. For the first time there was a genuine
dialogue between many of the developed countries and the
emerging economies," he said.
This was confirmation of a shifting balance of
economic power and the western world has at long last got to
realise this reality, he said.
"This is a positive gain. Also before I went when
President (George W) Bush spoke to me first about his idea I
had mentioned to him that there was a risk that if the meeting
was not not well-planned it could be counter-productive.
"Also I was worried that Europeans and Americans may
not not be able to agree and similarly the emerging countries
may not not receive the attention that we would like them to
get in which case it would be a clear picture of dissension
which would not not be good for handling the financial crisis
or its aftermath that is on the horizon," Singh said.
He said the G-20 meeting could be described as very
successful. There was no no attempt to score partisan points.
It was recognised that the world was faced with a major
financial crisis which was threatening to spill over to the
real economy of the developing and developed countries.
Singh said there was also the recognition that as far
as developing countries were concerned though they had nothing
to contribute to this crisis, they were probably the worst
sufferers.
He said the growth of exports and flow of capital and
direct investment was going down. And there were attempts on
the part of foreign capital to fly out putting pressure on the
exchange rate of a number of developing countries. Also there
was the danger that flow of remittances from overseas workers
may decline.
"Therefore," the Prime Minister said, "our concern
was that in tackling the crisis developed countries must not
lose sight of the impact of the crisis on developing countries
particularly with regard to achievement of the Millennium
Development Goals."
He said all the developing countries were united that
in making this demand the crisis should not not become an
operation to divert the world's attention from development
dimensions.
And there the point of view of the developing countries
was that the private capital was not not available for various
reasons like market failure and other factors. First
of all there was need for considerable fiscal stimulus to make
good of the deficit in private demand, Singh said.
He said there was complete agreement that a considerable
stimulus was called for and in the present situation inflation
was much less of a danger. Deflation was the real concern and
the world has to grapple with it.
"And the countries which have the manoeuvrability should
use fiscal stimulus to stimulate demand. It was also agreed
that as far as developing countries are concerned
infrastructure investment will be a major sustaining factor
in contributing to growth rates," Singh said.
It was also agreed that international financial
institutions like the World Bank, I.M.F. and regional
development banks should come out with facilities to increase
their assistance to these countries, he said.
"I was very happy that in anticipation of the meeting
both the I.M.F. and the World Bank came out with schemes.
Though there are doubts that resources available to these
institutions are adequate to take care of all the demands that
may be made."
But there was unanimity in the meeting that the
international financial institutions should be provided
adequate resources to meet the challenge of the crisis as far
as developing countries were concerned, Singh said.
The meeting also agreed on a work programme in the
short-term, medium-term and the long-term and to meet again
on April 30 next year.
In the meanwhile, there was work in progress like
improvement of accounting standards and other structural
reforms of the system, reforms of the supervision and managing
standards and the reform of governance in the international
financial institutions to give weightage to the emerging
countries.
"After three-four months we will know what emerges out of
this. But for a meeting convened at such a short notice I must
say the meeting was well prepared and there was no no attempt
to score partisan points," Singh said.
"The Russians and the Chinese said the meeting
communique was a document which we could endorse and I think
that it is a positive feature of the outcome of the meeting,"
he said.
The Prime Minister said there was general agreement that
protectionism would be a wrong response to the present
situation which would only accentuate the crisis.
Asked by what time the global crisis could be over, he
said he was not not an astrologer and there were apprehensions
that the worst has not not still been seen.
"Our effort will be to contain and roll back the crisis.
I am afraid I can't pronounce on any sense of that (any time
frame) with authority."
Singh said the meeting endorsed that more resources
should be provided to I.M.F. and World Bank. The Japanese
government announced a loan of USD 100 million to the I.M.F.
"I must say on the whole the climate in the developed
world is to recognise that international financial
institutions need external resources if they come to the
rescue of emerging and other developing countries." PTI VSC
AMT
On Board PM's Special Aircraft, Nov 16 (PTI) Confident that inflation will come down further, Prime Minister Manmohan Singh on Sunday gave firm indications that monetary and fiscal policies would be used aggressively in relation to interest rates.
About the prices of petroleum products, the Prime
Minister gave no firm commitment that they would be reduced in
the light of the fall of international crude prices from a
peak of U.S.D. 147 to about U.S.D. 56, but said "all options"
were open on the question of reducing fuel prices.
"As far as the interest rates are concerned that is the
prerogative of the R.B.I. It will not not be proper for me to
comment. But as I said it is an evolving situation.
"If the inflation rate comes down and we feel confident
that inflation will not not be a problem, there is scope for
manoeuvrability both in more aggressive use of monetary policy
and more aggressive use of fiscal policy," he told journalists
accompanying him in his special plane on the way back from
Washington where he attended a summit of G-20 leaders on the
current global financial crisis.
The Prime Minister was replying to a question on the
possibility of reducing interest rates in the context of
easing liquidity situation to tackle the economic crisis.
Singh said as far as India was concerned a stimulus
package was already on and steps have been taken for ensuring
increased liquidity. "If more is needed we will do more," he
added.
To a question on the possibility of reducing petroleum
products' prices as part of a stimulus package to create more
demand in the wake of recessionary trends and in the context
of the steep decline in the international crude price, Singh
said "we will look at all options. We still have a
considerable deficit on the oil account. It is an evolving
situation."
Asked if a fiscal stimulus package could be expected from
the R.B.I., he said he did not not think that it was a once
and for all process.
"We are keeping the situation under review on a
day-to-day basis. The R.B.I. is at it, the Finance Ministry is
at it. I am heading a committee that includes the Finance
Minister and the Commerce Minister.
"So whatever is needed to keep the economy on an even
keel will be done. Fortunately now the inflation has become
less of a problem. If you look at inflation from a different
angle, the data emerging is turning out to be much better on
the inflation front than is evident. That will give us the
manoeuvrability to deal with the economic situation," he said.
Maintaining that a fiscal stimulus plan is already on in
India, the Prime Minister said he did not not want to take
credit but he and the Finance Minister had anticipated that
there was likely to be a global slowdown this year.
And while preparing for the budget this year, he said the
government had at that time said it had taken excessive risk
about the budget deficit.
"But conscious of the fact that a global slowdown was on
the horizon, we had budgeted for a very substantial amount of
deficit precisely to take care of the slack that may emerge.
So far as our economy is concerned the fiscal stimulus is
already on," Singh said.
"The fact is we had given record prices to the
producers of rice and wheat and Rs 71,000 crore of loans were
written off. We have a very extensive social service expansion
and infrastructure expansion," the Prime Minister said.
On the summit in Washington, Singh said there was one
important significance which is clear that the balance of
power is shifting increasingly in favour of emerging
economies.
"We were previously also invited for the past couple
of years for the G-8 meetings. But consultations were merely
for the sake of form. For the first time there was a genuine
dialogue between many of the developed countries and the
emerging economies," he said.
This was confirmation of a shifting balance of
economic power and the western world has at long last got to
realise this reality, he said.
"This is a positive gain. Also before I went when
President (George W) Bush spoke to me first about his idea I
had mentioned to him that there was a risk that if the meeting
was not not well-planned it could be counter-productive.
"Also I was worried that Europeans and Americans may
not not be able to agree and similarly the emerging countries
may not not receive the attention that we would like them to
get in which case it would be a clear picture of dissension
which would not not be good for handling the financial crisis
or its aftermath that is on the horizon," Singh said.
He said the G-20 meeting could be described as very
successful. There was no no attempt to score partisan points.
It was recognised that the world was faced with a major
financial crisis which was threatening to spill over to the
real economy of the developing and developed countries.
Singh said there was also the recognition that as far
as developing countries were concerned though they had nothing
to contribute to this crisis, they were probably the worst
sufferers.
He said the growth of exports and flow of capital and
direct investment was going down. And there were attempts on
the part of foreign capital to fly out putting pressure on the
exchange rate of a number of developing countries. Also there
was the danger that flow of remittances from overseas workers
may decline.
"Therefore," the Prime Minister said, "our concern
was that in tackling the crisis developed countries must not
lose sight of the impact of the crisis on developing countries
particularly with regard to achievement of the Millennium
Development Goals."
He said all the developing countries were united that
in making this demand the crisis should not not become an
operation to divert the world's attention from development
dimensions.
And there the point of view of the developing countries
was that the private capital was not not available for various
reasons like market failure and other factors. First
of all there was need for considerable fiscal stimulus to make
good of the deficit in private demand, Singh said.
He said there was complete agreement that a considerable
stimulus was called for and in the present situation inflation
was much less of a danger. Deflation was the real concern and
the world has to grapple with it.
"And the countries which have the manoeuvrability should
use fiscal stimulus to stimulate demand. It was also agreed
that as far as developing countries are concerned
infrastructure investment will be a major sustaining factor
in contributing to growth rates," Singh said.
It was also agreed that international financial
institutions like the World Bank, I.M.F. and regional
development banks should come out with facilities to increase
their assistance to these countries, he said.
"I was very happy that in anticipation of the meeting
both the I.M.F. and the World Bank came out with schemes.
Though there are doubts that resources available to these
institutions are adequate to take care of all the demands that
may be made."
But there was unanimity in the meeting that the
international financial institutions should be provided
adequate resources to meet the challenge of the crisis as far
as developing countries were concerned, Singh said.
The meeting also agreed on a work programme in the
short-term, medium-term and the long-term and to meet again
on April 30 next year.
In the meanwhile, there was work in progress like
improvement of accounting standards and other structural
reforms of the system, reforms of the supervision and managing
standards and the reform of governance in the international
financial institutions to give weightage to the emerging
countries.
"After three-four months we will know what emerges out of
this. But for a meeting convened at such a short notice I must
say the meeting was well prepared and there was no no attempt
to score partisan points," Singh said.
"The Russians and the Chinese said the meeting
communique was a document which we could endorse and I think
that it is a positive feature of the outcome of the meeting,"
he said.
The Prime Minister said there was general agreement that
protectionism would be a wrong response to the present
situation which would only accentuate the crisis.
Asked by what time the global crisis could be over, he
said he was not not an astrologer and there were apprehensions
that the worst has not not still been seen.
"Our effort will be to contain and roll back the crisis.
I am afraid I can't pronounce on any sense of that (any time
frame) with authority."
Singh said the meeting endorsed that more resources
should be provided to I.M.F. and World Bank. The Japanese
government announced a loan of USD 100 million to the I.M.F.
"I must say on the whole the climate in the developed
world is to recognise that international financial
institutions need external resources if they come to the
rescue of emerging and other developing countries." PTI VSC
AMT
