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Our Bureau

New Delhi, Dec. 29 The Reserve Bank of India Governor, Dr D. Subbarao, on Monday met the Prime Minister, Dr Manmohan Singh, amid reports that the Government and the central bank were putting together a fresh economic stimulus package set to be rolled out before this weekend.

Speculation is rife that the stimulus package would primarily comprise monetary measures like cut in policy rates. The Planning Commission Deputy Chairman, Mr Montek Singh Ahluwalia, raised expectations of further policy rate cuts from the central bank as he pointed out that there was scope for monetary steps in the backdrop of declining inflation in the economy.

He said that the new stimulus package will be announced in the next few days. This package is likely to be the final one for the current fiscal. “I am hoping that we will get something. I can assure you that the main thing is to make sure that the expenditure we have already provided and the new expenditure, gets done. In the Planning Commission, we are not proposing any new expenditure for the current year,” Mr Ahluwalia told reporters here on Monday.

Earlier in the day, the RBI Governor met the Cabinet Secretary, Mr K.M. Chandrashekhar, and senior Government officials here. Bond prices have been rallying sharply in recent days on the back of expectations that RBI would further cut rates to spur growth in the economy.

Since October, the central bank has cut cash reserve ratio (CRR) by 350 basis points, repo rate by 250 basis points and reverse repo by 100 basis points. Also, Statutory Liquidity Ratio (SLR) has been cut by 1 percentage point.

The Government has already indicated that it would not want to add more on the plan expenditure side in the wake of less absorptive capacities with spending ministries, who are finding it difficult to spend on the existing programmes.

So far this fiscal, the Government has received Parliament nod for additional cash spend of about Rs 1,47,000 crore through two rounds of supplementary demand for grants. The spend comprised mainly food and fertiliser subsidies, farm debt waiver compensation to public sector banks, national rural employment guarantee programme and sixth central pay commission awards.

In the stimulus package announced on December 7, the Government had cut excise duty by 4 per cent across the board, except on petroleum products, besides announcing an additional plan expenditure of Rs 20,000 crore to boost demand.

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