FM wants banks to be benign

Finance minister Pranab Mukherjee is expected to meet banks in the next few days and ask them to come up with a more concrete action plan for boosting credit supply.

Addressing his first press conference after taking charge on Monday,the minister admitted that industry and business had been hit by the cost of finance and the lack of its easy availability. Even though international capital flows have resumed,the cost and speed with which finance can be accessed remains a matter of concern. One of the first steps I propose to take is to meet the bankers and get them committed to a more benign plan of action, he said.

In effect,he wants banks to cut lending rates further. Despite a 425 basis points cut in the repo rate by the Reserve Bank of India since September,banks have been reluctant to cut lending rates. The prime lending rates of most banks continue to be in double digits.

Mukherjee said that he would continue with increased spending to bring about inclusive growth and generate more employment in the country. It is expected that the government may go in for incremental borrowings in the current fiscal to meet its growth objectives.

However,he said,the government would restore fiscal prudence in the coming years. We have a plan to return to the path of fiscal consolidation in the next two to three years. But currently,clearly the focus is to return to high growth levels even though that cannot be done overnight. Even as developed economies collapsed we maintained a growth of about 6.5-7 per cent, the minister said.

Mukherjee announced his plan to table the Budget for 2009-2010 in Parliament during the first week of July and hoped that,after the Parliamentary Standing Committees were formed,he should be able to get a nod from Parliament by July 31. According to our manifesto,the new government is required to present the Union Budget within 45 days of coming to power. We will adhere to this schedule, he said.

The Budget will not only spell out the action plan for the current fiscal but will also signal the line that the UPA will take over the next five years. The finance ministry is currently assessing the impact of three doses of economic stimulus announced in December,January and in the Interim Budget.

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The minister asserted that sustained stimulus to growth could be harnessed by the next round of economic reforms. We have a broad plan of action in mind. I will get additional inputs when I have my pre-budget consultations with different stakeholders. All this will be distilled into a concrete short-term and medium-term vision and strategy for Indias economic growth, he said.

The UPA government also plans to push infrastructure development,which has lagged behind in the past two years. The pipeline of infrastructure projects will be re-appraised and made more robust. Where necessary,policy and procedures will be calibrated to give a boost to infrastructure spending, he said signalling a move to remove the pitfalls of the policies laid out for development of various sectors.

The minister also said that he plans to enforce the Prevention of Money Laundering Act Amendment passed by Parliament recently in order to make Indias anti-money laundering regime stronger in line with G-20 commitments of the government.