Indian business boost with new government

Tuesday, 26 May 2009 08:26

Indian firms hope new government will boost growth

The newly elected Congress-led government should move promptly and decisively to restore the rate of economic growth in India, even if that means higher inflation, industry leaders in the country have indicated.

As Prime Minister Manmohan Singh starts a second term of office, the business community said they hoped the government would announce a new fiscal stimulus. They also expressed a wish for the central bank to further lower interest rates.

The centre-left Congress coalition won a significant boost as share prices increased dramatically in the wake of the election victory.

Chandrajit Banerjee, director-general of the country’s leading industry body, the Confederation of Indian Industry, said, “As an immediate action, we hope for a further cut in short-term interest rates by at least 50 basis points.”
This would create an impetus for growth, he added.

Because of the global financial crisis, economists estimate growth for the fiscal year ending in March dropped to about 6.5%. This compares to 9% during the previous year.

The projection is for growth of approximately 6% during 2009, which will be the lowest for the past seven years.

“We are getting indications the government is working on specific reforms to support exports,” said Ankit Miglani, director of Uttam Galva Steels.

As a consequence of the global financial slump demand in India’s principal US and European markets fell by a third in March. This was the sixth consecutive monthly fall.

Editor’s comment: This relative change in India’s fortunes should be viewed in context. Most countries would die for an annual growth rate of 6% and with the recent decisive election victory the confidence of the business community should increase.

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