Economic Situation Abnormal, but bank deposits safe: PM

New Delhi: Prime Minister Manmohan Singh on Monday admitted that global financial meltdown has affected Indian economy, and termed the situation as ‘abnormal’. Expressing his doubts over the global financial crisis, he said that the situation is now likely to be more severe and prolonged. The PM also asserted that saving investors’ confidence is the first priority of his government. He further tried to dispel fears of investors regarding safety of bank deposits, saying that government stands behind the banks.

Singh was speaking to media after meeting industry leaders and discussing with them current economic situation.

Commenting on global financial meltdown, the Prime Minister said: "A crisis of this magnitude was bound to affect our economy and it has. International credit has shrunk with adverse effects on our corporates and banks. Global uncertainty is also tending to dampen investor sentiment."

The PM, however, voiced optimism by saying that a vigil stand could tackle the financial crisis. He further assured that his government is closely watching the market. On the international front, “we are working closely with other countries to ensure co-ordinated policy action and increased development co-operation for the containment of this crisis”, he added.

However, he said that the industry should refrain from any "knee-jerk" reaction such as large-scale layoffs, which might lead to a negative spiral and said "industry must bear in mind its societal obligations in coping with the effects of this global crisis."

The Prime Minister said that government would take measures for additional liquidity to help provide credit at reasonable rates. Singh said additional liquidity and reduction in repo rate will help to "provide credit at reasonable rates".

He vowed to take all necessary monetary and fiscal steps to protect growth rate and tide over the current crisis.

Earlier, in the day, the PM met industry honchos and discussed economic scenario with them. The group comprised Mukesh Ambani, Anand Mahindra, K V Kamath, Sunil Bharti Mittal, Deepak Parikh, Shashi Ruia, K P Singh and Rajkumar Dhoot.

Besides, Confederation of Indian Industry (CII) president Kamath, Federation of Indian Chambers of Commerce and Industry (FICCI) president Rajeev Chandrasekhar and Associated Chambers of Commerce and Industry of India (ASSOCHAM) chief Sajjan Jindal represented their chambers and urged the Prime Minister to give direction for enhancing liquidity in the system and restore confidence by lowering the interest rates.

Planning Commission chairman Montek Singh Ahluwalia and Reserve Bank of India (RBI) Governor D Subbarao were beside the Prime Minister for the interaction with the industry to explore options for pushing the economic growth in difficult times.

Senior government officials, including Chairman of Prime Minister's Economic Advisory Council Suresh Tendulkar and Economic Affairs Secretary Ashok Chawla, were among those who attended the meeting.



VIA