Chidambaram and RBI tug away at opposing economic agendas

Finance Minister P Chidambaram, with the aim of reviving investment uppermost on his mind, has asked banks to extend affordable credit for consumer durables, which in turn would revive the country’s flagging manufacturing sector.

“People must buy consumer durables, the middle class is postponing purchases, I have urged banks to keep EMIs affordable to stimulate purchases,” he said after meeting with public sector bank heads in the capital Saturday.

As India’s economy slows leaving a considerable impact on people’s purchasing power, the demand for home, auto and consumer durables have also taken a hit in the past many months.

The latest official figures indicate that manufacturing, which constitutes about 76 per cent of industrial production, declined an annual 3.2 per cent in June from a year earlier.

"We advised the banks to focus on sectors which deserve credit and which are crying for credit," Chidambaram said. "I think it is important that consumption of durables is supported to a great extent."

Chidambaram said, extending cheap credit to consumer durables will help domestic demand pick up in the country and also help manufacturing sector grow at the desired rate.

"Reviving investments is a key challenge for us. And, (investor) sentiment is not the only issue... sentiment will also change with other issues... once we get the investment engine started, I think many of our problems can be resolved," the finance minister said.
 The minister said that he would discuss the issues of fuel supply and land acquisition, which were inhibiting investments, with the line ministries.

Talking to reporters soon after taking over as finance minister earlier this month, Finance Minister Chidambaram had said that reviving investor sentiment was high on his agenda.