The government is likely to announce a financial package by the weekend to help the domestic industry and boost economy. The package may include interest subsidy for housing, leather and textile sector, besides announcement of interest rate cuts and other monetary measures. The matter was discussed by the high power committee, headed by Prime Minister on Tuesday. PM also reviewed the current financial market conditions and discussed measures taken by apex bank to solve the liquidity problem. The meeting was also attended by the Planning Commission deputy chairman Montek Singh Ahluwalia and RBI governor D Subbarao.

The cabinet secretary would also chair a meeting of the secretaries of finance and commerce on Wednesday for detailed discussion on the relief package. RBI may announce further cut in Rapo rate and Reverse Rapo. CRR is likely to be reduced by 150 basis points, leading to injection of Rs 60,000 crore into the monetary system. Interestingly, industry claims that banks are hesitating to extend the benefits of lower interest rates, keeping liquidity conditions as it is.

Government may announce more spending in the nfrastructure sector to boost demand at the local level. PM has already hinted to provide sufficient funds for select sectors like power and roads. Import duty reduction in the auto and engineering sectors may also be announced, to protect the domestic industry.