The Hindu : Kerala / Thiruvananthapuram News : Isaac calls for flexible Central policies

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Kerala - Thiruvananthapuram

Isaac calls for flexible Central policies

Special Correspondent

Says rule-bound approach should be changed in times of recession

‘No loan support from banks for housing scheme’
Says State has key role in stimulating economy

THIRUVANANTHAPURAM: Finance Minister T.M. Thomas Isaac has urged the Union government to be more flexible with its policies while introducing measures to stimulate the economy of the country in the face of the ongoing recession.

At a press conference here on Friday, he said the Reserve Bank of India (RBI) had just now informed the State government that the ambitious EMS Housing Scheme for the poor would not receive loan support from commercial banks.

This would mean that this scheme, to be implemented through the local bodies, would have to depend on loan from cooperative banks. Housing loans at low interest available for the middle class from the commercial banks were thus being denied to the poor families that would benefit from the EMS Housing Scheme in Kerala. This was a contradiction, he said.

“The usual rule-bound approach should be changed at least during the recession time. The Centre itself had identified vigorous housing activity as one of the steps that can help keep the economy buzzing during the recession days,” he said.

He said the RBI’s stand in this matter would result in an additional liability of around Rs.100 crore for the State government (since the interest burden on the credit availed by the local bodies for the scheme is to be borne by the State government.)

Dr. Isaac felt that the year 2009-10 could turn out a difficult year since the recession could touch the bottom of its trough then. The year would require the maximum possible public spending on the part of the government.

The governments in the States would find it very difficult to attend to this requirement since their revenue receipts could fall. The States’ share of Central taxes would come down in volume and the receipts from the States’ own taxes too could fall.

He wanted the Centre to keep such possibilities in view while drawing its strategy to tackle the recession-time difficulties. The States had a key role in making the initiatives to stimulate the economy a success.

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