Reserve Bank of India Governor Raghuram Rajan, on Tuesday, said the government’s target of reducing the current account deficit (CAD) to $70 billion or 3.7 per cent of the gross domestic product (GDP) in 2013-14 is ‘imminently reachable’.
“...there is increasingly a sense amongst analysts, amongst commentators that India’s current account deficit (CAD) problem is under control. $70 billion that the government proposed as a CAD after calculating it with us seems now imminently reachable. Some independent analysts are saying it will be even better,” Dr. Rajan told CNBC TV18.
The government is targeting to bring down CAD, the gap between foreign exchange outflow and inflow, to $70 billion this fiscal.
Dr. Rajan said the Finance Ministry’s decision to provide more capital to public sector banks would lower the borrowing cost and increase their capacity to lend, besides promoting investments.
“The government is thinking about adding more capital to the banks. We, as a regulator, are comfortable with that because we think that better capitalised banks are in everybody interest,” he said.
“I think, take both (MSF rate cut and recapitalisation) together, it will provide a fillip at this point to certain kinds of investments... Of course, indirectly some consumption will also get financed... But I don’t think in any situation there was an agreement that this would go towards specific sectors,” Dr. Rajan said.
Replying questions on the new bank licences, Dr. Rajan said the Reserve Bank of India would take into consideration views of the Parliamentary Standing Committee, which had expressed reservation on granting licences to corporate houses.