Indian Panel to Study Impact of Credit Crisis on Local Business

By Thomas Kutty Abraham

Nov. 8 (Bloomberg) -- India, the world's second-fastest- growing major economy, has set up a panel to study the impact of the global credit crisis on domestic companies.

The panel will be headed by the finance ministry and include top bureaucrats from the departments of commerce, industrial policy and promotion, and the planning commission, the ministry said in a statement on its Web site.

Indian companies have sought deeper cuts in interest rates and reserve requirements to increase the availability of cash. Prime Minister Manmohan Singh said the government will help companies tide over the effects of the financial crisis, which he said was worse than expected and may be ``prolonged.''

The central bank on Nov. 1 deployed all three of its main tools for shoring up growth, for the first time since 1997. It pared the repurchase rate to 7.5 percent from 8 percent, reduced the amount of deposits lenders need to set aside as reserves to 5.5 percent from 6.5 percent, and cut the amount of cash banks must keep in government bonds to 24 percent from 25 percent.

Output at India's factories, utilities and mines in August rose 1.3 percent from a year earlier, the slowest pace on record, as higher prices and borrowing costs damped consumer spending.

A coordination committee on financial markets, including Reserve Bank of India Governor Duvvuri Subbarao and Securities and Exchange Board of India Chairman C.B. Bhave, met in Mumbai yesterday to review the impact of the global financial turmoil on the nation's financial sector.

The group discussed measures taken to address the crisis and reviewed policy agenda for the future, the central bank said in a statement late yesterday.

To contact the reporter on this story: Thomas Kutty Abraham in Mumbai at tabraham4@bloomberg.net