India's growth, financial system will be protected: PM

By IANS

New Delhi, Nov 3 (IANS) Prime Minister Manmohan Singh Monday said the country's growth and the financial system would be protected from the fallout of what he termed as an "unprecedented crisis" and "abnormal situation" in the global economy. He asked India Inc to refrain from "knee-jerk" reactions like large-scale lay-offs.

Meeting with the presidents of apex chambers and leading industrialists at his South Block office Monday, the prime minister said steps were taken in recent weeks to lessen the impact of global financial crisis and that further measures will be taken to protect the country's economic growth.

"We're meeting at a time when the world economy is going through unprecedented crisis, which started in the financial sector in the US, but has now spread globally," the prime minister said.

"We recognise that the situation is abnormal and we need to be constantly on the alert. The situation is being watched on a day-to-day basis and more steps will be taken if required," he added.

"While every effort needs to be made to cut costs and raise productivity, I hope there will be no knee-jerk reaction such as large-scale lay-offs, which may lead to a negative spiral."

According to him, the first priority of his United Progressive Alliance (UPA) government was to protect the Indian financial system from a possible loss of confidence or contagion effects.

"I am happy to say that the direct exposure of our banks to problem assets is minimal. Our banks are well regulated and also well capitalised," he said.

"I think we have successfully conveyed to our people that our banking system, both in the public and the private sector, is safe, and the government stands behind it and that no one should fear for the safety of bank deposits."

The prime minister said the corporate sector also had a role to play. "Industry must bear in mind its societal obligations in coping with the effects of this global crisis," he said.

"The government and industry must act in a true spirit of partnership to meet the challenges that lie ahead."

Those invited to the meeting included presidents of the three apex chambers - Rajeev Chandrasekhar of the Federation of Indian Chambers of Commerce and Industry (FICCI), K.V. Kamath of the Confederation of Indian Industry (CII) and Sajjan Jindal of the Associated Chambers of Commerce and Industry of India (Assocham).

Reliance Industries chairman Mukesh Ambani, Bharti Group chairman Sunil Mittal, DLF chairman K.P. Singh, Mahindra and Mahindra chief executive Anand Mahindra, Essar Group chairman Shashi Ruia and Infosys co-chairman Nandan Nilekani were also invited.

From the government's side, Finance Minister P. Chidambaram, Commerce Minister Kamal Nath, Planning Commission Deputy Chairman Montek Singh Ahluwalia and other key officials also attended the meeting, which had an added emphasis in the wake of Manmohan Singh's upcoming visit to Washington next week at the invitation of US President George W. Bush for the G20 summit on global meltdown.

At Monday's meeting, the prime minister also agreed to set up a high-power committee to constantly review the situation, both domestic and global - and suggest swift actions.

"The committee may be headed by either the prime minister himself or the finance minister," Commerce Secretary G.K. Pillai told reporters after the meeting.

The prime minister's personal intervention also had a sobering effect on the country's equities market, with the barometer sensitive index (Sensex) ending with a gain of 549.62 points, or 5.62 percent over the previous close.

During the meeting, the prime minister said that both the government and institutions like the Reserve Bank of India (RBI) were closely monitoring the evolving macro economic situation and were fully alive to their respective responsibilities to sustain the growth momentum.

He also hinted at the steps that could follow by stating that expanding investment in infrastructure could play an important counter cyclical role in the situation, from India could no longer remain immune.

"We will review projects and programmes in the area of infrastructure development, including both pure public sector projects and public private partnership projects, to ensure that implementation is expedited and they do not suffer from constraints of funds," he said.