Ahluwalia hints at CRR, interest cuts

India needs to take more fiscal and monetary steps to stimulate demand and credit flows in a slowing economy, deputy chairman of the planning commission Montek Singh Ahluwalia said today, adding that the country was witnessing a decline in exports and investment demand.

Separately, Ahluwalia told the NDTV television channel that the Reserve Bank of India had done a lot to tackle the economic slowdown but had "headroom" to do more. "Part of the strategy was to be cautious and not to shoot every bullet in the gun right at the beginning. So they actually wanted to have some reserves, and they have a lot of instruments for reserves."

He said the central bank could cut the cash reserve ratio (CRR) and interest rates to add liquidity and help revive growth. "That is certainly an instrument they can use, both CRR and interest rates. The good thing is that they have a lot of scope. So I think on the monetary side we have all the flexibility we need," he said.

Ahluwalia said announcing sops in the interim budget would have been against established parliamentary practice. "It is necessary to have a vote in Parliament on the budget, otherwise we cannot spend any money," he said.

Ahluwalia added that the government had taken enough steps since October to tackle the economic crisis. "The crisis has been there since the middle of September and the government has been reacting to that crisis through multiple channels and since September up to the second stimulus, a lot of action has been taken and been fed into the budget," he said.