Millennium Post

Rajan urges political parties to pass key economic bills

'A stable government post-elections cannot be taken for would be dangerous for parties to postpone necessary legislations with the idea of passing the legislation post-election. Post-election politics may become even more challenging for whoever assumes power,' he said.

Rajan spoke at the Delhi Economic Conclave 2013 on The Agenda for the Next Five Years here. Similarly, Rajan said delays in putting large, stalled projects back on track or an additional fiscal slippage would only amplify the challenges that the new government will face.

'It will benefit the economy if Parliament passes key bills and if current authorities take action to improve growth and fiscal health, including raising diesel prices to market level and eliminating other poorly targeted subsidies,' the Governor said.

Rajan said that in the absence of a stable government after the elections, due early next year, political parties would have to work together to meet the challenges facing the economy, otherwise the markets and rating agencies may not be kind to India.

Rajan said economic growth seems to be stabilising. 'We are seeing some glimmerings of stronger growth. But its too early to say we have certainly hit bottom. But I am hopeful that (growth) would be around 5 per cent.' The country's economic growth slowed to decade low of 5 per cent in the previous financial year.

On growth prospects, the RBI Governor said the agricultural sector has picked up following a good monsoon and India is likely to harvest a good crop. Several stalled projects have been cleared with the hope that investments will start in the second half of this financial year. 'So that's relatively good news on the growth front. I think growth is stabilising, though it's too early to call it bottomed out at this point,' Rajan added.

He exuded confidence that the government would contain the fiscal deficit at the target of 4.8 per cent of GDP. On the current account deficit, Rajan said part of the reduction is on account of suppressed gold imports.

'This was necessary in the short run but it is not desirable over the medium term. Similarly, not all measures to reduce the fiscal deficit are of the highest quality,' Rajan said. The Governor said the central bank would take more steps in the weeks ahead to increase liquidity in the government securities (G-secs) market.

He said India is much better prepared for the US Federal Reserve tapering its stimulus programme.
'We are much better prepared to deal with any possible tapering. We would not say we are complacent. There would be unexpected effects of tapering, but we are much better prepared.’

‘Anti-inflation battle to remain RBI’s priority in coming monetary policy’

New Delhi: With seven more days to go for the next monetary policy review, the Reserve Bank of India on Wednesday said it will focus on controlling inflation and roll back measures taken to check rupee volatility to improve liquidity. ‘It (inflation) is proving very costly to our economy in terms of savings, in terms of investment. We need to bring inflation down.... No single data or point or number will determine our next move, but our effort is firmly on controlling inflation,’ RBI governor Raghuram Rajan said.

The Reserve Bank of India hiked key interest rates by 0.25 per cent each in the last two reviews to tame inflation. The next mid-quarterly policy review is scheduled for 18 December.  ‘In the coming weeks, we will roll out more measures. We have rolled out some, such as interest rate futures but we will roll out more measures to improve the liquidity and depth of the G-sec market. ‘In particular, we need to look at increasing liquidity across the spectrum of bonds that are traded not just for 10-year bonds.... We will also strengthen corporate debt market,’ he said.

To check exchange rate volatility, the RBI had hiked the MSF interest rates and eased norms for raising foreign funds by banks under the FCNR(B) scheme.
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