Seeking to paint a rosy picture, Finance Minister P Chidambaram on Friday said the fiscal and current account deficits are under control and the economy is more stable than it was 18 months ago.
"The economy certainly is more stable today than what it was 18 months ago.
“That is reflected in the strengthening of the rupee, that is reflected in heightened interest of investors, both foreign direct investment and foreign institutional investors," he told reporters after addressing the board of the Reserve Bank of India.
Chidambaram, who had taken over as Finance Minister 18 months ago in August 2012, said the fiscal deficit target for 2013-14 will be met and the current account deficit will be contained below $40 billion.
"I am glad that the measures taken by the RBI and measures taken by the government are complementing each other and have delivered substantially the goal of stability that we had set for ourselves 18 months ago," he added.
To a question about the issuance of new bank licences, RBI Governor Raghuram Rajan said the central bank would take a decision in the next few weeks, subject to approval of the Election Commission.
"My sense is if all goes well, we should be able to do it (issue new licences) in a few weeks," Rajan said, adding that the RBI would approach the Election Commission to ensure there is no violation of the model code of conduct.
The code came into force on March 5, when the Lok Sabha poll schedule was announced. Talking about the economy, Chidambaram said India must achieve ‘price stability and growth, that is what the people of the country of want and that is what the people of the country deserve.’
He expressed confidence that by ‘working together’ the government and RBI would be able to achieve these targets.
To a query on easing of curbs on gold imports, the Finance Minister said the government would revisit the matter after the final CAD numbers are out.
Chidambaram said he made no recommendations to the RBI regarding the bank licences.
"We had appointed the Jalan Committee. The Jalan Committee report is before the RBI. I have not seen the Jalan Committee report.
“The RBI will take appropriate decisions.
“If at some stage the Governor wishes to share its contents with me, then I would be very happy to listen.
“But I don't intend to speak," he said.
Referring to his meeting with the RBI Board, the minister said he was happy that the Governor acknowledged that the government through Parliament will set an inflation target and then leave the regulator to find ways and means to achieve it.
"I think that is the correct approach.
“The sovereign has the right to set the target and then the central bank has the mandate to take steps to achieve the target.
“I think that there is a great degree of convergence on the way to go forward," Chidambaram added.
To a query on capital infusion in public sector banks, Chidambaram said it is time to ‘look for new or innovative’ ways to raise more capital for the banks.
"We are looking at issuing shares to employees.
“We are looking at rights issue for minority shareholders.
“There was some discussion about non-voting shares but I think the time has come to look for new or innovative ways to raise more capital for the banks," he said.
He, however, added that the decision in this regard will be taken by the next government as ‘that is the appropriate way to go about it.’
Rajan said there is a need to create a process for capital raising and it would be worked out over time.
"We have to give them (banks) more confidence that they will give adequate returns. “We will work out over time.
“So it is a process. The Finance Minister mentioned different forms of capital raising so these will be explored," the Governor said.
Image: P Chidambaram; Photograph: Reuters