CII asks govt to print currency notes

NEW DELHI, March 31 (PTI): Industry chamber CII today asked the government to print more currency notes to bridge fiscal deficit and keep the economy afloat, which is reeling under the impact of global financial meltdown.

“If the government is going to borrow from the market to fill the fiscal deficit, then they are going to suck up all the money available in the banks and we will be crowded out,” the new CII President Venu Srinivasan told reporters here.

Pitching for monetisation of the budget deficit, he said, “It means printing notes. Which means you have the risk of increasing inflation but at the same time you will keep the economy afloat”.

He further said that government should also amend the Fiscal Responsibility and Budget Management Act, which imposes restrictions on public expenditure.

Raising concerns over the government’s decision to raise an additional Rs 300,000 crore during 2009-10 to fund public expenditure, CII chief said very little money would be left for the private sector.

Adding off-budget items and state deficits, total government deficit is likely to be in excess of 10 per cent of the GDP, he said, adding revenue deficit accounts for over 70 per cent of the fiscal deficit. Asked whether monetisation would help or not, the newly elected President said, “Otherwise with such a high level of deficit you will find investments drying up in the country.”

Srinivasan also said that the government should further reduce the key interest rates like repo (short term lending rate) and reverse repo rates. “There is need to reduce repo and reverse repo rates by 50 basis points,” he added.

He said that at the current rates several projects are still not viable.

The president, while ruling out any possibility about the country slipping into deflation said that the government should not publish the inflation data weekly.

“High borrowing is keeping interest rates from falling in line with inflation,” he said.

Suggesting more fiscal measures, he said that the government should further ease the indirect taxes – excise, service tax for specific sectors.

He also said that to avoid injury to domestic industry owing to artificially low priced imports aggressive safeguard mechanism needs to be in place.

“This could be supplemented by strengthening anti-dumping directorate,” he said.

To deal with the land acquisition issues to stimulate manufacturing sector, he said that the government should acquire land systematically and transfer it to industry in a transparent manner.