India's finance minister is calling for price cuts, as well as a drop in interest rates, to stimulate demand as growth slows in the nation of 1.2 billion people. Palaniappan Chidambaram says, despite the global economic crisis, a dip in Indian exports and investors pulling money out of the country, India's economy will be back on its high-growth track in six to 12 months. VOA Correspondent Steve Herman in New Delhi reports.
India's finance minister is deriding the "gloom and doom" enveloping the domestic economic mood, contending Prime Minister Manmohan Singh's government is working "24-7" to take steps to fend off the ill effects of a global slowdown.
Speaking at a summit of the World Economic Forum in New Delhi Tuesday, Palaniappan Chidambaram called for Indian consumer lending rates to drop several points from the current 13 percent level. He also says industries - instead of sitting on inventory - need to accept a temporary cut in profits to retain market share and do their part to stimulate consumer demand.
"Hotels must cut tariffs. Airlines must cut prices. Real estate must cut prices of homes and apartments they sell. Carmakers, two-wheeler makers must cut prices," he siad. "The classic response to a demand slowdown is to cut prices for a short time."
The finance minister acknowledged some of the other challenges facing India's economy: billions of dollars being repatriated by foreign institutional investors, declining exports and a depreciating rupee against the dollar.
Some international economists say India's economic overseers are still too concerned about inflation, preventing them from taking immediate steps to cut interest rates. But domestic observers point out that the government, with an eye on elections, is worried about a backlash at the polls, if it cannot keep food prices under control.
Chidambaram says, even if India's annual growth rate dips to seven percent from its recent yearly increases of about nine percent, that would be no reason don "sack cloth and ashes." He predicts, although there will be a slowdown, the agricultural sector - employing about half of all Indians - remains healthy and the country's overall economy will quickly be back on track.
"By the end of 12 months, we will back to the normal growth that we would like to have. There's no reason to spread gloom and doom," he said. "There are negatives, but there are positives. We should emphasize the positive and send out a message of confidence and our ability to overcome this crisis."
The finance minister cautions action should not be taken based on the daily gyrations of the Mumbai stock market.
His comments come following the Group of 20 crisis summit of world leaders. Prime Minister Singh and the finance minister attended the meeting.
Chidambaram says the G-20 has surpassed the G-7 as the "single-most important forum for financial and economic issues of the world."