and Industry, Coimbatore
Press Release
January 3, 2009: 2nd Economic Stimulus Package
Our Chamber welcomes the 2nd stimulus package announced by the Government and also the cut in repo rate to 5.5 per cent from 6.5 per cent and reverse repo to 4 per cent from 5 per cent. However our Chamber has apprehensions whether the anticipated cut in interest rates will happen soon. Our Chamber has been demanding reduction in the interest rates by 3 percent with immediate effect. Our Chamber also is of the opinion that the 0.5 percentage point reduction in CRR from 5.5 to 5 per cent, which will release Rs.20,000 crore bank funds, will come into effect from the fortnight beginning January 17, may not ease the liquidity position due to the banks 'risk aversion'.
The actions of RBI in bringing down Repo and reverse Repo rate have not translated into actual reduction in interest rates by PSBs in the past, and reduction in CRR has not resulted in increase in lending by banks.
Our Chamber has been seeking a two-year moratorium from payment of term loan and interest, abolition of fringe benefit tax and Securities Transaction Tax (STT). That there is no announcement on these, is disappointing.
Our perception is that an air of unreality pervades the government's attempts to tackle the economy's downslide and it appears unsure about what should be done to halt the downslide. For example the proposal to effect import duty cuts in essential goods to bring down prices and boost demand is ill-advised. The proper course would be to discourage import of such goods and boost indigenous production, which would generate employment opportunities or at least maintain the existing level of jobs. In addition to boosting industrial production, focused attention should be turned to the agricultural sector, to sustain rural employment and meet the growing requirement of food grains.
Conceding the impact of economic slowdown in US, the European Union and developed countries, the Union Minister for Textiles Mr. Shankar Singh Vaghela had admitted that the export target of $25 billion including textiles and handicrafts for 2008-09 appears to be under pressure, and had sought agri business status for cotton, besides lending rate of 7 per cent for all cotton mills with the margin money being brought down from 25 per cent to 10 per cent in a bid to help mills overcome the operational difficulties. It is very disappointing that there is no announcement on this.
We appeal to the Government to come out with a focused special package for the Textiles, Automobiles and MSME sectors, and also ensure that the announcements actually transform into benefits for the distressed sectors.
Mahendra Ramdas
President