The new Congress-led government is expected to announce a fresh economic stimulus during its first 100 days to pull the economy out of its present slowdown. Prime Minister Manmohan Singh had said during the election campaign that his government would come out with a stimulus within 100 days. He had added that he was in talks with the Reserve Bank of India (RBI) for an effective programme.

Exports fell by an unprecedented 33 per cent in March and April, and industrial production in March fell by a record 2.4 per cent. Although some surveys of business opinion have shown an uptick, growth in the new financial year is not expected to be much better than last year’s likely figure of 6.5 per cent.

However, the stimulus package, the fourth since the slowdown set in last October, will be constrained by a fiscal deficit that has already ballooned. The Budget for the year, likely to be presented in 45 days, will therefore be a difficult balancing act.

The pending sale of spectrum for third-generation (3G) telecom services is expected to help the government bridge the deficit, which may rise if the new government decides to implement some of the promises made in the Congress manifesto.

At the same time, the new government will be in a position to push through legislation related to the financial sector, which includes amendments to the Insurance Act. The amendments provide, among other things, for an increase in the foreign investment ceiling from 26 per cent to 49 per cent.

In addition, the Bill to provide legislative backing to the Pension Fund Regulatory and Development Authority is expected to head back to Parliament.

The Congress may renew its efforts to push through the National Rehabilitation and Resettlement Act and the Land Acquisition Act, which are aimed at helping companies acquire land by paying better rates to farmers.

The other area where the new government will get a free hand could be disinvestment of its stake in public sector companies. Over the next few weeks, the new finance minister may unveil the policy on disinvestment which will focus on initial public offers from Oil India, National Hydro-Power Corporation and some fertiliser companies.

“With the Congress being able to form an alliance with like-minded partners, the government can look at disinvestment and also encouraging private sector participation in infrastructure,” said Saumitra Chaudhari, a member of the Prime Minister’s Economic Advisory Council and economist with rating agency Icra.

Among the various promises that the party will have to keep are a second farm loan relief on interest to all farmers who repay loans on schedule. With RBI making it clear that the government has to bear the burden for such schemes, a Budgetary allocation will be required.

The Congress manifesto had also talked about a National Food Security Act to ensure 25 kg of wheat or rice to every family below poverty line, besides promising at least 100 days of work at a real wage of Rs 100 a day under the National Rural Employment Guarantee Act.

Tags: 2009 stimulas package, Congress, Manmohan stimulas, National Rural employment guarantee act, new congres manifesto, new congress stimulas package

Similar Posts:

• Govt plans to divest 10% in IOC and 5% in ONGC
• Disinvestment target has to be achieved: FM
• Tax sops, more funds for welfare, infrastructure in budget
• Textile industry to get Rs 2,550 cr in 72-hours: Maran
• Government relesese stimulus 2.0, short on punch