Govt to use aggressive monetary policies: PM

ON BOARD PM'S SPECIAL AIRCRAFT: Confident that inflation will come down further, Prime Minister Manmohan Singh on Sunday gave firm indications that monetary and fiscal policies would be used aggressively in relation to interest rates.
    
About the prices of petroleum products, the Prime Minister gave no firm commitment that they would be reduced in the light of the fall of international crude prices from a peak of USD 147 to about USD 56, but said "all options" were open on the question of reducing fuel prices.
    
"As far as the interest rates are concerned that is the prerogative of the RBI. It will not not be proper for me to comment. But as I said it is an evolving situation.
    
"If the inflation rate comes down and we feel confident that inflation will not not be a problem, there is scope for manoeuvrability both in more aggressive use of monetary policy and more aggressive use of fiscal policy," he told  journalists accompanying him in his special plane on the way back from Washington where he attended a summit of G-20 leaders on the current global financial crisis.
    
The Prime Minister was replying to a question on the possibility of reducing interest rates in the context of easing liquidity situation to tackle the economic crisis.
    
Singh said as far as India was concerned a stimulus package was already on and steps have been taken for ensuring increased liquidity. "If more is needed we will do more," he added.

"The fact is we had given record prices to the producers of rice and wheat and Rs 71,000 crore of loans were written off. We have a very extensive social service expansion and infrastructure expansion," the Prime Minister said.
    
On the summit in Washington, Singh said there was one important significance which is clear that the balance of power is shifting increasingly in favour of emerging economies.
    
"We were previously also invited for the past couple of years for the G-8 meetings. But consultations were merely for the sake of form. For the first time there was a genuine dialogue between many of the developed countries and the emerging economies," he said.
    
This was confirmation of a shifting balance of economic power and the western world has at long last got to realise this reality, he said.
    
"This is a positive gain. Also before I went when President (George W) Bush spoke to me first about his idea I had mentioned to him that there was a risk that if the meeting was not not well-planned it could be counter-productive.     

"Also I was worried that Europeans and Americans may not not be able to agree and similarly the emerging countries may not not receive the attention that we would like them to get in which case it would be a clear picture of dissension which would not not be good for handling the financial crisis or its aftermath that is on the horizon," Singh said.
    
He said the G-20 meeting could be described as very successful. There was no no attempt to score partisan points. It was recognised that the world was faced with a major financial crisis which was threatening to spill over to the real economy of the developing and developed countries.

Singh said there was also the recognition that as far as developing countries were concerned though they had nothing to contribute to this crisis, they were probably the worst sufferers.
    
He said the growth of exports and flow of capital and direct investment was going down. And there were attempts on the part of foreign capital to fly out putting pressure on the exchange rate of a number of developing countries. Also there was the danger that flow of remittances from overseas workers may decline.
    
"Therefore," the Prime Minister said, "our concern was that in tackling the crisis developed countries must not lose sight of the impact of the crisis on developing countries particularly with regard to achievement of the Millennium Development Goals."
    
He said all the developing countries were united that in making this demand the crisis should not not become an operation to divert the world's attention from development dimensions.
    
And there the point of view of the developing countries was that the private capital was not not available for various reasons like market failure and other factors. First of all there was need for considerable fiscal stimulus to make good of the deficit in private demand, Singh said.
    
He said there was complete agreement that a considerable stimulus was called for and in the present situation inflation was much less of a danger. Deflation was the real concern and the world has to grapple with it.

"And the countries which have the manoeuvrability should use fiscal stimulus to stimulate demand. It was also agreed that as far as developing countries are concerned infrastructure investment will be a major sustaining factor in contributing to growth rates," Singh said.
    
It was also agreed that international financial institutions like the World Bank, IMF and regional development banks should come out with facilities to increase their assistance to these countries, he said.
    
"I was very happy that in anticipation of the meeting both the IMF and the World Bank came out with schemes. Though there are doubts that resources available to these institutions are adequate to take care of all the demands that may be made."
    
But there was unanimity in the meeting that the international financial institutions should be provided adequate resources to meet the challenge of the crisis as far as developing countries were concerned, Singh said.
    
The meeting also agreed on a work programme in the short-term, medium-term and the long-term and to meet again on April 30 next year.
    
In the meanwhile, there was work in progress like improvement of accounting standards and other structural reforms of the system, reforms of the supervision and managing standards and the reform of governance in the international financial institutions to give weightage to the emerging countries.