Interest rates likely to go down by 2% as part of stimulus package

Interest rates are likely to go down by two percentage points as the newly-elected UPA government is all set to tell banks to lower lending rates as part of a fourth stimulus package to be announced within 100 days of its formation. The objective of the government is to boost domestic demand to pull the economy out of slowdown. The stimulus package will also bring relief for the export sector, which has been badly hit due to global slowdown. In April, exports were down 33% from the same month last year. According to a source, government will also expedite the implementation of the infrastructure projects under public private partnership (PPP) programme. However, sources said that the fourth package will not have large element of fiscal measures like tax rate cuts as government has already lost huge amount of revenues while announcing previous three packages. The fiscal deficit in 2009-10 is likely to be over 6% of GDP.