Prime Minister Manmohan Singh met leaders of Indian industry on Monday and assured them that the government would take all measures to protect the economy in view of the global financial crisis which, he said, was now likely to be more severe and prolonged, reported dpa.
He also urged them to play a positive role and avoid "knee-jerk" reactions like large-scale lay-offs, according to a release from the prime minister's office.
"We're meeting at a time when the world economy is going through an unprecedented crisis ... A crisis of this magnitude was bound to affect our economy and it has," the prime minister said.
The government's first priority, he added, was to protect the financial system from loss of confidence and it had successfully conveyed to the people that the Indian banking system was safe as it was well regulated and with minimum exposure to problem assets.
"We have also taken several measures to infuse liquidity into the system to ensure adequate flow of credit," Singh said.
The Reserve Bank of India on Saturday reduced its key short-term lending rate for the second time in a fortnight and also reduced the reserve requirements of banks to increase liquidity in the market which has seen sharp losses since January but has partially recovered since last week.
"We recognize that the situation is abnormal and we need to be constantly alert. The situation is being watched on a day-to-day basis and more steps will be taken if required," Singh said.
"Government and industry must act in a true spirit of partnership to meet the challenges that lie ahead," Singh told the gathering which included residents of India's three apex chambers of commerce and industry as well as some of the country's top industrialists including Mukesh Ambani of Reliance Industries, Sunil Mittal of the Bharti group and Infosys co-chairman Nandan Nilekani.
Federal Finance Minister P Chidambaram, deputy chairman of India's Planning Commission Montek Singh Ahluwalia and Reserve Bank of India governor D Subbarao were also present at the meeting.
The Indian economy has grown by 9 per cent annually, but the current year's financial outlook has been revised to about 8 per cent.
Singh said he hoped the Indian corporate sector would not let the global crisis shake its confidence. "While every effort needs to be made to cut costs and raise productivity, I hope there will be no knee-jerk reaction such as large-scale lay-offs which may lead to a negative spiral," Singh said.
He assured the gathering that the government would take all necessary monetary and fiscal policy measures on the domestic front to protect growth rates.
"On the international front, we are working closely with other countries to ensure coordinated policy action and increased development cooperation for the containment of this crisis."
Singh, an economist by training, said India would seek reform of international financial institutions and improved regulation and supervision to prevent recurrence of such crises.