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Economy to turn around soon: FM

June 10, 2009 18:45 IST
Buoyed by better than expected economic growth last fiscal, Finance Minister Pranab Mukherjee on Wednesday expressed hope that the economy, spurred by fiscal and monetary stimulus packages, would turn around soon.

"I hope that the impact of various pro-growth measures would help turn around the economy soon. As a result of various measures announced by the government and the Reserve Bank of India, today we are looking at our economy with a lot of hope," Mukherjee told the heads of PSU banks.

He said the last quarter GDP growth figure of 5.8 per cent and the annual growth of around 6.7 per cent for 2008-09 is a pointer towards this direction.

Despite contraction in manufacturing output in the fourth quarter last fiscal, economic growth figures were well in the range projected by RBI-- 6.5-7 per cent-- and better than what many had forecast.

The Finance Minister's remarks assumes importance as the Prime Minister had on Tuesday said India can grow at 8-9 per cent despite the global slowdown.

Mukherjee also said, "The stock market also seems to be quite bullish. Prime lending rates of banks have come down to the range of 12-12.25 per cent as against 13.75-14.25 per cent six months back."

The benchmark equity index Sensex has gained 56 per cent this calendar year to close at 15,466.81 points on Wednesday.

The government, has so far, given three stimulus packages by cutting excise duty by six per cent, service tax by two per cent and increasing public expenditure apart from taking other sector-specific measures.

Besides, the RBI also loosened money supply by cutting its policy rates to make funds available to the industry at a cheap rate.

RBI had cut short term lending rate (repo) by 4.25 percentage points, short term borrowign rate (reverse repo) by 2.75 percentage points and mandatory cash requirements for banks (CRR) by four percentage points.

"The unwinding of earlier tightening measures and the relaxation in risk weights and provisioning norms facilitated flow of credit to the sector under stress," Mukherjee said.

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