Indian economy needs more stimulus in 2009-10: Ahluwalia

Business Standard, March 28, 2009

The Indian economy needs more stimulus in the next fiscal to counter the impact of global economic slowdown, Planning Commission Deputy Chairman Montek Singh Ahluwalia said today.

“We need a little more stimulus in 2009-10. But there are certain issues which have to be taken up,” Ahluwalia said on the sidelines of a function here.

About the GDP growth projection by the Planning Commission, Ahluwalia said multiple models have been used to derive the figures and have been suggested to the Prime Minister.

“We have sent a note to the Prime Minister. Planning Commission doesn’t have any projection. What we said to the Prime Minister– we used multiple models to know what is likely to be growth rate next year,” he said.

“There is certain base level of growth which we thought was around 9 per cent. Then you knock off from the growth the affects of shock. Then we add to it the affect of the positive stimuli… So there are different numbers depending on the affects of shock and stimulus measures,” he added.

Earlier, Ahluwalia projected a growth rate slightly less than 7 per cent in the current fiscal and the next fiscal.

“We are likely to get a growth rate less than 7 per cent… Between 6.5 and 6.7 per cent in 2008-09,” Ahluwalia had said.

On market borrowings impacting the interest rate, Ahluwalia said, “If you borrow it can only raise the interest rate for any given level of monetisation. Markets borrowings are not zero anyway.” Market borrowings, he said, “has always been market borrowings and there will be market borrowings.”

“The impact of the exchange rate is the function that whether monetary policy accommodates the borrowing or not. So its not that market borrowing increases and interest rates go up. It is based on how much you borrow and tighten and interest rates will go up,” he added.

Earlier addressing a function on “Competition and Regulation in India” by CUTS international he suggested assessment and ranking of state electricity regulatory authorities by the industry body CII or other bodies and replicating it in all states based on best practices.

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