PM panel for key rate cut as industrial production falls

In the backdrop of industrial production shrinking in December for the second time in this fiscal, Prime Minister's Economic panel today favoured cut in key rates by RBI, but maintained the overall growth forecast at 7.1 per cent for 2008-09.

"I have favoured revising interest rates downwards," Prime Minister's Economic Advisory Council (PMEAC) Chairman Suresh Tendulkar said, however, added that the Reserve Bank would take a final call on lowering the rates.

On stimulus packages, Tendulkar said, "The government has already announced two stimulus packages and time should be allowed for these measures to work."

He added that the effect of the measures to spur economic growth cannot be expected to work instantly. "Economy is not like a coin operated machine."

The Reserve Bank since mid-September had announced a series of rate cut measures to improve the liquidity in the system. However, it kept the key policy rates unchanged in its quarterly monetary policy released last month.

The industrial production, despite stimulus packages, declined by two per cent in December 2008 for the second time in the first nine months of the current fiscal.

The government, many feel, will have to revise its projections for industrial output to rise by 4.8 per cent and economic growth at 7.1 per cent in 2008-09.