India Launches $4 Billion Economic Stimulus Package To Restore Investor Confidence

December 7, 2008 12:36 p.m. EST

New Delhi, India (AHN) - India has announced nearly $4 billion (200 billion rupees) to aid the country's ailing economy that has been weakened by the current global financial turmoil, slumping credit market condition and a terrorist attack.

The country's Prime Minister Manmohan Singh issued a statement on Sunday that the goverment will infuse the capital in the current year as a part of a program worth around 3 trillion rupees over the next few months in fiscal year.

The government has acknowledged that India's economy will continously require stimulus over the next two years, which can be achieved by ensuring a substantial increase in plan expenditure as part of the budget for next year.

Under a series of measures to revitalize economy, the Reserve Bank of India (RBI) on Saturday slashed the key benchmark interest rates for the third time in less than two months.

The country's central bank announced that it was cutting key interest rates by as much as 1 percentage point to deal with on-going financial meltdown and to bolster the investor confidence after recent Mumbai's terror attacks.

"Having assured stability of the system, the Government has focussed its attention on countering the impact of the global recession on India's economic growth," the government said in a statement.

It added, "On the monetary side, the RBI has sought to pump sufficient liquidity into the banking system to enable bank credit to meet the expanded requirements of the economy keeping in mind the contraction in credit from non-bank sources."

The statement also indicated that the authorities are planning to spend the money on funding infrastructure projects, allowing export incentives, supporting financial firms and providing relief to several homeowners who have borrowed money from the banks.