Crisis “unexpected,” but not impossible to tide over
CHENNAI: Union Finance Minister P. Chidambaram on Wednesday reposed faith in the dynamism and resilience of the Indian economy to emerge stronger from the current inflation crisis.
Laying the foundation stone for a new head-office building of Indian Bank, he said the economy had bounced back whenever it faced a grave challenge such as during the first oil shock (1973) or the Asian crisis (1997-98).
The Finance Minister said it was not easy to finance a 9-per cent growth rate as opposed to the “entirely different ballgame” of financing a 5-6 per cent growth rate. When the economy was clocking over 9 per cent growth, credit would expand, capital flows would increase and foreign investments would come in, he said.
Changes in fast-expanding economies could create problems in developing countries. Besides the dramatic spurt in oil prices, the prices of commodities such as lead, zinc and copper had gone up. The crisis was “unexpected,” but not something that was impossible to tide over, he said. “We have to deal with the situation with calm, confidence and a sound (monetary) policy”.
Terming the country’s financial sector the lifeline of economy, Mr. Chidambaram said the banking sector in the country had made stellar contributions to removing the socio-economic problems of our country.
The Finance Minister said there was no reason for a conflict between the banking industry’s commercial ambitions and the government’s socio-economic objectives.
“It is possible to advance commercial objectives of banks and the socio-economic objectives of the government.” Mr. Chidambaram complimented public sector banks for conceiving several schemes for the economic uplift of the rural population, especially ryots through a credit continuum, farm loan waivers and other incentives.
The Finance Minister pointed out that the banking sector’s disbursement of an estimated Rs.20,000 crore as education loans to about 12 lakh students was unprecedented anywhere in the world.
He stressed the importance of clear policies in the banking sector for improving the country’s economy.
M. S. Sundara Rajan, Indian Bank chairman and managing director and A. Subramanian, executive director spoke.