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
"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."