'Fiscal stimulus should continue to support recovery'

The government should continue with the fiscal stimulus packages in the medium term to facilitate recovery in the economy hit by global economic meltdown, a top official with JSW Energy said.

"I think the (fiscal) stimulus packages must continue in the medium term, as economy is still in a recovering stage. This will provide a cushion to the industries," JSW Energy, Chief Financial Officer, Pramod Menon said.

Noting that stimulus packages in the past have helped India Inc face the downturn, Menon said, on the back of improving business confidence corporates are now back with major projects. To sustain growth, continuous investment in the capacity expansion is required, he said.

"If companies are in a better position today despite the ill effects of slowdown, that is on account of the investments done in the past," Menon said. "Investments in the capacity expansion plans should continue in the same pace, as it is necessary to sustain a healthy level of corporate earnings, as we move ahead," he said.

On the back of recovery in the economy, corporate earnings are expected to improve in 2010, Menon said. Also, foreign investment is much needed to finance large infrastructure projects, he said.

On the impact of migration to the new international Financial Accounting Standards, Menon said, the migration to IFRS is unlikely to result in any major impact in the earnings of Indian companies as most of the business houses are prepared for the move.

He attributed the slowdown in bank credit to the mid-corporate and SME segments mainly to the scarcity of bankable projects.

"Banks have not stopped lending. But banks were not so keen to lend to small corporates mainly on account of the scarcity of bankable projects," Menon said.