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C.Rangarajan.9.Thmb.jpg Rangarajan pitches for selective stimulus for industry

Rangarajan.9.jpg
The Chairman, Economic Advisory Council to the Prime Minister, Dr. C. Rangarajan addressing an event in Kolkata on June 29, 2012.
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SME Times News Bureau | 30 Jun, 2012

Stating that action would be taken to cut the subsidy bill as early as possible, C. Rangarajan, chairman of the Economic Advisory Council of the prime minister, said it was possible for the government to provide a "selective" stimulus package for industry.

"I think the stimulus package which was introduced in 2008-09...it is a bit difficult. Because we now have a high fiscal deficit," Rangarajan told reporters in Kolkata.

"But within the framework of containing the fiscal deficit, it is possible to provide some selective stimulus," he said.

Rangarajan, however, said action would be taken as early as possible to cut the government's subsidy bill. "We must ensure that fiscal deficit is contained at the budgeted level," he added.

On capital inflow, Rangarajan said it would come in once global economic prospects improve and the country's growth starts picking up.

"The uncertain world economic situation, especially in Europe, has created a situation of risk aversion. That is some concern about investment in general. And therefore it has affected to some extent the overall capital inflow of the developing economies," he said.

"That is the factor which is outside the control of India and unless the global economic prospects improve and the risk aversion comes down, perhaps we cannot expect the capital flow of as large as we used to," he said.

Rangarajan said India's slow growth rate, high rate of inflation and high fiscal deficit had also led to low foreign investment in the country this fiscal.

"There are country specific issues also. When FIIs are investing in India, they have the opportunity to invest in other countries as well. And therefore they will take a look at the return available in India and also the returns available elsewhere," he observed.

Rangarajan said the sentiment could be reversed when the economy would show high growth rate this year.

"If we show that the growth rate started picking up, that will itself act as the stimulus for the capital flow in the country."

He said the government needed to reassure the FIIs in the face of "some misconception" about the retrospective amendments to the Income Tax Act.

"If there are some misconceptions about the some changes that we have made, we need to remove them not necessarily through statutory changes, but reassuring them that the changes that we have introduced are not intended against anybody's interest." 

 

 
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