India's finance minister admitted Monday that the government had no scope to increase public spending to spur the flagging economy, but said interest rate cuts might be possible. Shock economic growth figures published last Thursday showed the Indian economy growing at 5.3 percent in the January-March period, the slowest quarterly growth figure in nine years.
India unveiled a huge stimulus programme after the last global slowdown following the financial crisis of 2008 in the United States and Europe, but its finances are now strained as the eurozone debt crisis gathers pace. "The second round of global uncertainty and the slowdown has come rather quickly on the heels of the previous one, with practically no headroom for running a proactive fiscal policy," Finance Minister Pranab Mukherjee said.
The deputy governor of the Reserve Bank of India, Subir Gokarn, also hinted at the possibility of a rate cut on Monday, raising the chances the bank will slash the cost of borrowing again at its June 18 meeting. Gokarn Monday told reporters in Mumbai that India's economic growth is "lower than expectations, and that may have a positive, moderating impact on core inflation", Dow Jones Newswires reported.
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