Having delivered on what was expected of the government on the fiscal consolidation front, Finance Minister P. Chidambaram, on Friday, hoped that the Reserve Bank of India (RBI) would now take the cue and take a commensurate call on the issue of interest rates in its mid-quarter monetary policy review on January 19.
Briefing reporters after his customary post-Budget meeting with the RBI Board here, Mr. Chidambaram said: “On the fiscal consolidation path, the government has walked the talk. The RBI, of course, will take into account the overall broad economic situation and what happens between now and March 19 and take a call [on interest rate]...We have delivered on the fiscal consolidation path.”
While the RBI had lowered its short-term lending (repo) rate by 25 basis points along with easing of the CRR (cash reserve ratio) by a similar margin to make more funds available in the monetary system, India Inc. has been demanding and the government is of the view that a further easing of rates will act as a catalyst to ignite consumer demand and spur investment growth, especially when industrial growth has been on a steady decline.
Hinting at what the government expects of the apex bank, Mr. Chidambaram noted that he had, as committed, restricted the fiscal deficit to 5.2 per cent for 2012-13 and has pegged it lower at 4.8 per cent of the GDP (gross domestic product) for the new fiscal year beginning April 1.
“As far as the government is concerned, the government promised that we will work towards fiscal consolidation and as early as two months ago. I had said red lines that have been drawn will not be breached under any circumstances…We have delivered on [the] fiscal consolidation path chalked out by the Kelkar Committee. We have remained under 5.3 per cent as promised, and we have shown, next year we will be at 4.8 per cent,” the Finance Minister said.
As for the government’s borrowings programme during 2013-14, Mr. Chidambaram said: “We will borrow next year only Rs.10,000 crore more than this year’’ in terms of gross borrowing and “in terms of net borrowing we will borrow only Rs.5,000 crore more than this year.”
Alongside, as if timing it with the ‘International Women’s Day’ on March 8, Mr. Chidambaram announced that a committee of bankers and other experts had been set up to prepare a blueprint for an All-women bank — as proposed in the Budget for 2013-14 — that is likely to become operational by November. “The committee has been asked to submit the blueprint for women bank by April 30,” he said.
The committee will be headed by former Canara Bank Chairman M. B. N. Rao and its members are: former CMD (Bank of Baroda) M. D. Mallya, SEWA Managing Director Jayshree Vyas, MD and CEO SBI Caps Arundhati Bhattacharya, Punjab National Bank Executive Director Usha Ananthasubramanian, and Indian Banks’ Association Chief Executive K. Ramakrishnan.
In his Budget speech on February 28, Mr. Chidambaram had proposed the setting up of country's first all-women bank fully-owned by the government and earmarked Rs.1,000 crore for this purpose.
On the issue of the Supplementary Demands for Grants tabled by him in Parliament, Mr. Chidambaram said: “All the cash outgo has been provided for in the Revised Estimate (in Budget 2013-14). These are technical.”
The government has sought approval for an additional expenditure of Rs.49,715.54 crore, mainly to meet the higher-than-budgeted spending on fuel, fertilizer and food subsidies during the current fiscal.