Mukherjee puts 'Gandhian' focus on rural economy

Emphasising 'Gandhian' economics and rural upliftment, acting finance minister Pranab Mukherjee said on Friday that the government will announce more stimulus packages to promote growth and protect jobs as the recession worsens. He cautioned that the deepening global crisis meant that India's economy is expected to grow at  seven per cent in 2008-09, far slower than the previous year's nine per cent.

Mukherjee said the government would take further steps to protect labour-intensive sectors. The external affairs minister, in charge of the finance portfolio during Prime Minister Manmohan Singh's convalescence, is scheduled to present the government's interim budget in Parliament on 16 February.

Mukherjee added that in these times, it was important to revisit Gandhian economics, with emphasis on rural self-help and sustainable development. ''Anything contrary would be disastrous,'' he said. He urged global financial institutions to put more resources for developing countries to their rural economy, social infrastructure.

"As the next year's outlook is more downbeat, the government has taken a number of fiscal measures to inject liquidity, bring down the cost of borrowing and stimulate demand. When necessary, the government will take further steps to ensure that labour-intensive sectors are less adversely affected," the minister said at a conference organised by the Research and Information System for Developing Countries (RIS).

He said the country has the capacity to push the economy forward on the strength of domestic demand; but for this it must invest more in infrastructure, labour intensive sectors and the improvement of the social safety net.

After the seminar, Mukherjee told reporters that for an announcement of specific measures, "you will have to wait till I present the budget". The interim budget is due to be presented before Parliament on 16 February.

Home minister P Chidambaram, who held the finance portfolio till recently, had said on Thursday that the government would be well within its rights to announce new measures despite the impending elections.

Mukherjee also said that global financial institutions need to make more resources available for developing countries. "They have to allocate funds for the rural economy, social infrastructure and local communities. The resources must be put in institutional capacity-building and skills. Nearly 70 per cent of India's population depends on agriculture, and the recent economic growth has not fully percolated to the rural areas.

The government is also pushing for an Asian regional approach to lessen the impact of the economic crisis. Mukherjee said that India is attaching great importance to groupings like the South Asian Cooperation, the Association of Southeast Asian Nations (Asean), and the South Asian Agreement for Regional Cooperation (Saarc).
Appreciating Asean for taking steps towards regional economic integration, he said: "A regional financial architecture, drawing upon the high currency balances in Asia, would mitigate the severity of the economic crisis for us."

The latest indication of the government's fiscal intentions comes a day after commerce secretary G K Pillai noted that yet another stimulus-like package was likely to be announced by the month-end to prop up various sectors of the economy.