Finance Minister Arun Jaitley, who took stock of the macroeconomic parameters at a meeting of the Financial Stability and Development Council (FSDC) on Saturday, highlighted the need to improve business climate and reduce the cost of doing business to revive the investment cycle.
The FSDC meeting, the first since Jaitley took charge as finance minister in the Narendra Modi-led National Democratic Alliance government, was attended by representatives of all financial-sector regulators, including Reserve Bank of India (RBI) Governor Raghuram Rajan.
“There is a need to improve business climate and reduce the cost of doing business for reviving the investment cycle,” Jaitley said after the meeting in the RBI headquarters here. “We have discussed the current financial and economic indicators and received suggestions from the regulators on the coming policies of the government.”
Reaffirming the government’s resolve to keep finances under control, the finance minister said he was against “slackening the vigil in the area of fiscal consolidation”.
The country’s gross domestic product (GDP) grew at 4.7 per cent in 2013-14, at a rate below five per cent for a second year in a row, mainly due to a decline in manufacturing and mining output. The annual economic growth in the fourth quarter of the year had stayed subdued at 4.6 per cent.
But the members of the council noted there was an improvement in some key macroeconomic parameters — the fiscal deficit has come down, the current account deficit has narrowed with an increase in foreign exchange reserves and a stability is returning to the forex market. After seeing a steep depreciation against the dollar in August last year, the rupee has gained some strength following a series of steps by the government and RBI.
The council, however, also observed that there was a long way to go before a full economic recovery, with inflation under check and fewer infrastructure bottlenecks, could be achieved.
Asked about his government’s views on the P J Nayak committee’s recent report on governance at banks, Jaitley said: “You will have to wait for our application of mind on these subjects.” The Nayak committee has recommended, among other things, that the government give up its control at public-sector banks and bring down its holding to under 51 per cent.
Earlier this week, RBI had maintained the status quo on the repo rate and the cash reserve ratio but eased the statutory liquidity ratio, even as the retail inflation rate rose in April.
The central bank had cited the new government’s resolve to addressing the long-pending concerns facing the country’s economy. “The finance minister referred to the high political expectation from the new government and the opportunity now available for resolving the long-pending problems of the economy,” a Press Information Bureau statement had said.
FSDC, conceived by the previous United Progressive Alliance, works towards the objective of financial stability, apart from coordination of financial regulators.
During Saturday’s meeting, all financial regulators also presented their suggestions for the coming Union Budget and their views on the next generation of financial reforms.