Indian Inc, banks hit by global meltdown: PM

Indian corporates and banks have been hit by shrinking global credit dampening investor sentiment, Prime Minister Manmohan Singh said today asserting the government will take steps to sustain growth momentum.

In a meeting with captains of industry and business to assess the impact of global meltdown, he asked the industry not to show "knee-jerk reaction" such as large scale layoffs that may lead to a 'negative spiral'.

"The financial crisis has exacerbated a global downturn that was expected earlier but is now likely to be more severe and prolonged. A crisis of this magnitude was bound to affect our economy and it has.

"International credit has shrunk with adverse effects on our corporates and banks. Global uncertainty is also tending to dampen investor sentiment," he said.

India's first priority was to protect the financial system from possible loss of confidence or contagion effect.

"The situation is abnormal and we need to be constantly on the alert. The situation is being watched on a day to day basis and more steps will be taken if required," he said while assuring that "...Our banking system both in the public and private sector is safe and government stands behind it and no one should fear for the safety of bank deposits."

The meeting was attended, among others, by Mukesh Ambani, K V Kamath, Shashi Ruia, Deepak Parekh, K P Singh, while Finance Minister P Chidambaram, RBI Governor D Subbarao and Planning Commission Deputy Chairman Montek Singh Ahluwalia were also present.

During the meeting, India Inc asked the Prime Minister to inject enough liqudity and ensure slashing of interest rates to drive the economy on a high growth trajectory.