Indian Finance Minister P Chidamabaram on Tuesday asked industry to cut prices and maintain production levels and said he was confident that the economy would bounce back in a year, news reports said.
"We will take steps to stimulate the domestic economy to compensate for the downside caused by the downturn in the world economy," Chidambaram said at the Davos-based World Economic Forum's India Economic Summit in New Delhi, reported dpa.
"The classic response to demand slowdown is to cut prices for the short term," he told a gathering of top business leaders, officials and economists from India and abroad attending.
The only way Indian business could maintain its financial health was by keeping inventories down and stimulating consumer demand to enjoy hard-won market share. They should also try to retain loyal and hardworking employees, he said.
He said it was a cause of concern that the 30 per cent or higher rise in profits after tax enjoyed by Indian industry in recent years had dropped to 10-12 per cent.
The government and federal bank had taken measures to ensure liquidity in the system including rate cuts, he said, and promised to examine further excise duty cuts if required.
"Just have your chin up, and in six-nine months, or maybe 12, we will bounce back to the normal growth rates that we are used to," Chidambaram said.
India has posted gross domestic product (GDP) growth of 9 per cent since 2006. However, this is now projected to slow down to between 7 and 7.5 per cent.
Indian business leaders were not impressed by the minister's statements saying that immediate measures like rate cuts were needed to stimulate demand.
Rahul Bajaj, chairman of Bajaj Autos, India's number one two-wheeler manufacturer, said his company had been cutting prices for over a year without being able to boost sales. He said he saw no further scope for price cuts.
Venugopal Dhoot of Videocon Electronics said there was immediate need to stimulate demand and interest rate cuts were the only way out.
In his address to the WEF summit, Chidambaram also said that the G20 group of nations had emerged, with the recent meeting in Washington, as the single most important forum to address the financial and economic issues of the world.
"The G7 has recognized belatedly that they alone don't have the solutions to all the problems ... The G20 is a much better forum than the G7," Chidambaram, who had accompanied Indian Prime Minister Manmohan Singh to Washington, said.
He said the summit was a good beginning. "The emerging economies are happy."