Hoping to maximise political dividends, and also not wanting to take the limelight away from the steps spelt out by the Reserve Bank of India (RBI) today, the United Progressive Alliance (UPA) government has delayed announcing its much-awaited measures to kick-start the slowing demand in the domestic economy, said two senior government officials.
The other reason was last-minute glitches in finalising the fiscal stimulus package, especially with reference to infrastructure spending, said a finance ministry official.
Minister of State in the Prime Minister’s Office (PMO) Prithiviraj Chavan told Business Standard, “PM’s presence in Delhi is absolutely necessary when this fiscal package is announced. He was not in Delhi and so it could not be announced.”
Prime Minister Manmohan Singh was on a day’s visit to various parts of West Bengal. “We don’t want the fiscal package to be lost in the crowd,” said a senior official in the PMO, who declined to be named. “Two major decisions have been taken in two consecutive days, so a third one can wait for a day or two,” he added.
On Friday, the petroleum ministry reduced the petrol and diesel prices by Rs 5 and Rs 3, respectively, after the state-run oil companies started making profits on these products with crude oil prices dipping below $45 a barrel.
This was followed by the RBI decision to reduce key interest rates by 1 percentage point and also to infuse additional funds, targeting real estate and small and medium enterprises (SMEs).
Initially, the plan was to cut the fuel price after elections in Jammu and Kashmir get over on December 24, but the government pushed back the announcement to generate positive news in the middle of political heat, especially after the Mumbai terror attacks, said senior Congress party sources.
After the global financial crisis began affecting the domestic markets too, Prime Minister Manmohan Singh constituted an apex committee comprising of senior ministers to discuss and finalise measures to minimise the impact on India. This committee was supported by a committee of secretaries, which met on a daily basis and collected demands from various industries.
Cuts in excise duty on the most affected sectors, like automobiles and textiles, are expected to be part of the fiscal package, said the finance ministry official.
Other measures discussed include a Planning Commission proposal to increase public spending through infrastructure projects. The idea being that private investments would come down drastically in the current economic scenario and the public investment would compensate for that.
Industry representatives have demanded relief measures from the government in the form of reduced taxes and interest subsidy on loans to help them tackle the problems arising from global financial crisis. For example, the textile industry claimed an additional half million jobs would be lost in the next four months if the government did not offer help.
