The high-level FSDC headed by Finance Minister Nirmala Sitharaman on December 15 discussed the additional measures that could be taken by the government in the next Budget to accelerate growth while maintaining financial stability.
The meeting, which was also virtually attended by Minister of State for Finance and Corporate Affairs Anurag Singh Thakur, noted that there is a need to keep a continuous vigil by the government and all regulators on the financial conditions that could expose financial vulnerabilities in the medium and long-term.
The 23rd meeting of the Financial Stability and Development Council (FSDC) noted with comfort that the policy measures taken by the government and the financial sector regulatory authorities have ensured faster economic recovery, as reflected in the reduced contraction of GDP in Q2 of 2020-21.
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The meeting discussed the Budget proposals submitted by the RBI and other regulators which are members of the FSDC, a statement said.
The 2021-22 Union Budget will spell out the road map for the growth strategy for the next financial year. As per various estimates, India is expected to record a growth of 8% in 2021-22.
Due to the impact of the coronavirus pandemic, the economy contracted by 23.9% during the first quarter of the current financial year. However, the pace of contraction narrowed in the second quarter to 7.5%.
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“The economy has gained momentum and the path to recovery will be faster than what was predicted earlier,” as per the statement issued after the meeting which was held through video conferencing and attended by various financial sector regulators.
The discussions were held on further measures which may be required to ensure consistent support of the financial sector for achieving faster real economic growth and meeting the overall macroeconomic targets, while continuing to maintain financial stability, it said.
The Council also discussed the challenges involved in smooth transition of London Interbank Offer Rate (LIBOR) based contracts and noted that a multi-pronged strategy involving relevant stakeholder institutions and departments is required in this regard.
The meeting also took note of the activities undertaken by the FSDC Sub-Committee chaired by RBI Governor Shaktikanta Das and the initiatives taken by the various regulators in the financial sector.
The FSDC is the apex body of sectoral regulators, headed by the Finance Minister.
Besides the RBI Governor, Securities and Exchange Board of India (SEBI) Chairman Ajay Tyagi; Insurance Regulatory and Development Authority of India (IRDAI) Chairman Subhash Chandra Khuntia; Insolvency and Bankruptcy Board of India (IBBI) Chairman M.S. Sahoo; Pension Fund Regulatory and Development Authority (PFRDA) Chairman Supratim Bandyopadhyay; and International Financial Services Centres Authority (IFSCA) Chairman Injeti Srinivas were present in the meeting.
Economic Affairs Secretary Tarun Bajaj, Revenue Secretary Ajay Bhushan Pandey, Financial Services Secretary Debasish Panda and other top officials of the finance ministry also attended the meeting.
This was the fourth meeting of the FSDC after the Narendra Modi government returned to power in May last year.
Last week, the Asian Development Bank (ADB) upgraded its forecast for the Indian economy, projecting 8% contraction in 2020-21 as compared to 9% degrowth estimated earlier.
Earlier this month, the RBI Governor said the economy is recuperating faster than anticipated and growth rate is likely to turn positive in the second half of the current fiscal.
In 2020-21, the economy is likely to contract 7.5%, which is an improvement over the RBI’s previous projection of 9.5% contraction, Mr. Das had said.