Updated: February 4, 2014 23:44 IST

Deceleration in growth arrested: FM

Special Correspondent
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P. Chidambaram. File Photo
The Hindu
P. Chidambaram. File Photo

He was speaking at the ninth meeting of the Financial Stability and Development Council (FSDC) here.

Union Finance Minister P. Chidambaram, on Tuesday, said that the deceleration in economic growth had been arrested in the second quarter of 2013-14. Inflationary pressures and structural bottlenecks were, however, some of the factors that continued to weigh down the growth process, Mr. Chidambaram added. He was speaking at the ninth meeting of the Financial Stability and Development Council (FSDC) here.

Stressing the need for the government and the financial sector regulators to ensure robust growth and manage vulnerabilities, the Finance Minister said that inter-regulatory issues should be resolved in a time-bound manner by the FSDC Sub-Committee and priority should be accorded to steps such as common demat account for financial assets which would add considerable benefits to the consumers.

Reserve Bank of India Governor Raghuram Rajan, Finance Secretary Sumit Bose, Economic Affairs Secretary Arvind Mayaram and Securities and Exchange Board of India (SEBI) Chairman U. K. Sinha were also present at the FSDC meeting chaired by Mr. Chidambaram.

The FSDC made an assessment of the issues relating to financial stability, including preparedness of the Indian financial system for the impact of U.S. tapering, liquidity crunch and re-pricing of risk, according to an official statement issued here. It reviewed the progress on pursuing the implementation of recommendations of Financial Sector Legislative Reforms Commission (FSLRC); assessed the external sector vulnerabilities; deliberated on asset quality, capital adequacy and management and governance-related issues of banks; as also issuance of Basel-III compliant capital instruments by banks. The Reserve Bank apprised the Council of the developments under the aegis of the FSDC Sub-Committee since the last meeting of the FSDC held in October, 2013.

Asset quality

The FSDC also noted the deterioration in the asset quality of banks and its impact on capital adequacy ratios, the release said.

It reviewed the measures taken by the government and the RBI to revitalise the distressed assets and assessed the additional capital requirements of banks under the Basel-III norms.

“The Council apprised of certain management and governance-related issues of banks and discussed further remedial measures,” the release said.

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The balance is
Deficit - net import = net private savings. The best way of seeing this is to look at data. Open Is the tag.
This is verified graphically by Prof. Stephanie Kelton using published US data in
Is the tag. DEFICITS become WEALTH. Govt DEFICIT is your NON DEFICIT!
Red area = cumulative deficit= national debt = private wealth=sum of blue and green.Red is positive downward, blue positive upwards and green is positive downwards. Deficits are exactly equal to savings plus imports. This is an accounting identity.

from:  Parthasarathy shakkottai
Posted on: Feb 7, 2014 at 03:40 IST

@Parthasarthy: How did you arrive at this formula? Do you really
understand the meaning of deficit? How can it be equal to net
wealth, the graph shown in the twitter account shows sectoral
balances as percentage of GDP in various years. It also shows that
recession may not significantly affect a country's own capital
The objective should always be to reduce deficit, which improves a
country's financial rating , thereby also improving its currency
value. To reduce deficit imports must be reduced and exports
increased. Overall cash-flow should be towards the country which
can be achieved by domestic manufacturing and/or investing and
earning on foreign assets.

from:  Arun Mehta
Posted on: Feb 6, 2014 at 17:19 IST

It is impossible for the economy to grow more than what the deficits allow. To be precise, the
rate of growth of the economy is exactly the same as the rate of growth of deficits. Reason?
Which means (delta DEFICIT )/DEFICIT = (delta SAVINGS)/ SAVINGS = 4.8% in the present
case, assuming NET IMPORTS = 0. If India imports more the growth will be even smaller.
What is the big prediction? This is elementary arithmetic. USA has nothing to do with this
Is the tag. The data is self explanatory and strikingly simple. It proves deficits become wealth
and national debt is the same as national wealth.
The biggest mistake India is making is minimizing deficits. Quite foolishly, I should say.

from:  Parthasarathy shakkottai
Posted on: Feb 5, 2014 at 10:14 IST
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