Will the PM Walk the Talk?

By SiliconIndia   |   Friday, 29 June 2012, 10:59 Hrs   |    2 Comments
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Bangalore: Manmohan Singh’s call for reviving the “animal spirits in the country’s economy” arouses the hope that the government may start acting with a sense of urgency. But is it sufficient to cheer about?

According to a report by Times of India Cabinet Secretary Ajit Seth called a meeting of secretaries of key economic ministries to discuss the ways to ensure a pick-up in growth, including a possible stimulus. The meeting was basically to discuss the proposals made by industry chambers Ficci and CII.

The report said, “Industry chambers Ficci and CII have proposed that the government provide enhanced depreciation rate of 25 percent that will encourage manufacturers to step up capacity addition and replace old machinery.” There are also proposals to revive capital expenditure and investment.

However,  for the government, , any decision to provide concessions to industry is not going to be a cake walk, as it will have to keep in mind the ever-widening fiscal and current account deficits. The reforms will have to be lashed out with a boost in prices of diesel, if not decontrolling its altogether. This will help the government contract its fuel subsidy burden to a huge extent. With the international crude oil prices falling, it is the right time for the government to act on fuel prices.

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