Date:29/10/2008 URL: http://www.thehindu.com/2008/10/29/stories/2008102960361500.htm

National

Steps to check financial crisis not effective: CPI

K.V. Prasad

NEW DELHI: Warning that steps taken by the government to check the impact of the U.S. financial meltdown were more of the same measures that led to the crisis in the first place, the Communist Party of India on Tuesday said the Manmohan Singh government should increase spending and encourage the public sector to expand its activities.

“Steps to infuse liquidity in the market have not helped. The government should boost production, ask the public sector to expand by placing orders and universalise ration to increase consumption,” CPI Parliamentary Party leader Gurudas Dasgupta said.

Reacting to the assessment by Dr. Singh that crony capitalism and inadequate regulatory mechanism were factors behind the crisis in the U.S. financial market, the CPI leader accused the government of pursuing similar policies at home.

He said that for the past few weeks, the Centre had injected Rs.80,000 crore into the market and forced public sector institutions such as the Life Insurance Corporation to pump in crores. “This too is now lost and eventually people’s savings are being eroded. The government is indulging in gambling and policyholders will feel the impact since LIC assets have been devalued,” he said.

Mr. Dasgupta said he wrote to the Prime Minister on Monday expressing concern over the moves made to keep the share market up. The government tried to attract foreign institutional investors by raising caps and also allowed participatory notes but the FIIs continued to leave.

Mr. Dasgupta said the effect of the global financial crisis was being felt in India also. He claimed that some multi-national corporations were planning to cut cost by trimming staff and reducing shifts.

He said the trade unions decided to meet shortly to discuss the problems being faced by industries.