P Chidambaram at IBA AGM
Mumbai / June 6 2013
Fiscal deficit target of 4.8 per cent easily achievable : Chidambaram
Finance Minister P Chidambaram has expressed confidence that fiscal deficit target of 4.8 per cent during 2013-14 can be easily achieved. Addressing the Annual General Meeting of the Indian Banks’ Association, IBA in Mumbai today, Mr Chidambaram said, “we have been able to lower the fiscal deficit from 5.3 per cent to 4.9 per cent. This has been achieved through substantial fiscal tightening in the second half of last year.” He said the government hopes to achieve the fiscal deficit target without compressing expenditure, but by expecting investments to pick up in remaining three quarters of the year. Mr. Chidambaram also said that there is no cause for concern over the fall of the Indian Rupee as the capital inflows were strong. “I think the Rupee will stabilize and find its correct level” he said on the sidelines of the IBA AGM.
Current Account Deficit – a major worry
Mr. Chidambaram however expressed serious concern over the current account deficit and blamed increasing gold imports for much of the problem. He informed that while on an average 70 tons of gold was imported in a month during 2012-13, the monthly gold imports have doubled during the current fiscal. Finance Minister strongly discouraged the practice of investing in gold and also asked the banks not to promote sale of gold coins. “Gold is like any other metal, it only shines a bit more”, he added.
Current growth rate is not satisfactory, but there is hope
Referring to the current GDP growth, Mr. Chidambaram admitted that 5 per cent growth is low and is not acceptable. Though, this rate is being termed the lowest in a decade, the Finance Minister pointed out that the Indian economy registered its lowest growth of the new century during 2001-02 and 2002-03, at 4.8 per cent and 4 per cent. “We are not satisfied with the growth picture, but there is hope”, he added.
Mr. Chidambaram said an increase in rural demand following a good rabi crop, increased government spending and lower inflation will help the economy to grow. In order to kick-start the economy, the FM said, the government has decided to improve the investment sentiment in the country. Stating that 215 major projects entailing a capital expenditure of Rs 7 lakh crores have been stalled, Mr. Chidambaram said the Government has set up a special committee to track them and will seriously work towards removing all bottlenecks. “I assure investors that each project will be tracked and government will help see them through”.
The Finance Minister said it is a matter of relief that the wholesale price inflation is falling and the Consumer Price Inflation is also showing moderation. “As the inflation rate falls, there will be more disposable income with the people, which will lead to growth in deposits with banks, as the current interest rates are attractive.”
FM said India can’t afford growth of less than 8 per cent, if we have to take advantage of demographic dividend. “It is not a pious hope, It is India’s potential growth rate” he added.
Banks should improve profitability ; promote financial inclusion
Speaking about the banking sector, Mr. Chidambaram said Rs 5 lakh crores would be required in the form of capital infusion to meet the BASEL norms. Out of this 3 lakh crores will be non equity. He said, a substantial portion of the equity capital should be financed through retained earnings, and hence called upon the banks, particularly the public-sector banks to improve their profitability. He asked them to reduce their Non Performing Assets, by going after the wilful defaulters.
Chidambaram also asked the banks to promote financial inclusion by opening more branches in severely under banked blocks and districts.