With inflation touching near zero level, Prime Minister Manmohan Singh said on Saturday there is scope for further cuts in interest rates and assured the industry that credit needs would be met to enable the economy tackle the global financial crisis.
"With ample liquidity and low inflation, there is scope perhaps for a further moderation in interest rates. Domestic credit flow for productive needs has to be definitely maintained at reasonable cost," Singh said in his meeting with industry leaders in New Delhi before his departure for the G-20 meet in London next week.
RBI governor D Subbarao, who was also present in the meeting, had almost disappointed the industry at the CII annual session on Thursday when he stated that further stimulus package would have a cost in the form of more borrowing requirements of the government.
Taking stock of the economy post stimulus packages, the prime minister said: "There are signs of improvement in sectors like steel and cement...The rural demands for goods and services appears quite robust and the outlook in the agriculture sector gives room for optimism."
He said public sector banks disbursed more credit in the current fiscal than in 2007-08 but the lending by private sector and foreign banks was reduced to one-third to one-fourth of that a year ago.
The prime minister said that while India is 'decidedly better placed' than most countries in the world, there is uncertainty on developments abroad.
"To tackle a regime of low inflation and demand uncertainties across some sectors of the real economy, to ensure that the financial sector remains healthy and supportive, to husband foreign exchange reserve responsibly, to sustain a high level of expenditure bearing in mind the need for fiscal discipline.. are challenges that we confront," Singh said.
Commenting on the impact of downturn on employment, he said: "We must meet the challenge of job losses caused by the slowdown."
The prime minister also sought views of the corporate honchos on India's stand at the G-20 Summit on April 2, where the 20 most influential developed and developing countries would put their minds together to find a way out of the global crisis.
The prime minister said the world looks at India 'with respect and hope: respect for our calibrated reforms which has resulted in growth with justice and hope that India would be an engine of growth for the world economy'.
The corporate heads said India must express its strong opposition to global protectionism. The issue of dumping by China into the Indian markets was also raised at the meeting.
India, Brazil and China have been seeking more say in the new global financial system post-crisis.
Planning Commission deputy chairman Montek Singh Ahluwalia and Cabinet secretary K M Chandrasekhar also attended the meeting.
Tata group chief Ratan Tata, Aditya Birla group chairman Kumar Mangalam Birla, ICICI Bank managing director and CEO K V Kamath, Essar Group's Shashi Ruia and Assocham President Sajjan Jindal were among those present.
Other prominent businessmen present in the interaction included R P Goenka of the Goenka group, Adi Godrej of the Godrej group, Sunil Kant Munjal of Hero group, Baba Kalyani of Bharat Forge and CII Chief Mentor Tarun Das.
CII president Venu Srinivasan said while certain sectors of the economy were starting to show some signs of recovery, areas like manufacturing and small and medium enterprises 'were in great pain'.
Ficci president Harsh Pati Singhania said a lot more continuous boost and stimulus would be needed to maintain India's growth. Assocham President Sajjan Jindal said lending rates by banks should come down to single digit around 7-8 per cent immediately to kick start the economy.