Quotes with Resistance & Support
Market Information

Budget will bear pressure of stimulus: RBI governor

This article was posted on May 24, 2009 and is filed under Press Releases

MUMBAI: Delivering the keynote address at The Financial Management Summit ’09 hosted by The Economic Times, Reserve Bank of India Governor Dr Duvvuri Subbarao said the crisis emerging from the global recession has been the worst ever in his time.

Under such a scenario, stimulus packages announced by the global governments assume huge importance, he said. However, irrespective of this, the debate over the adequacy and effectiveness of fiscal measures by different governments continues, he said.

Every government and regulator is trying to protect his nation from the impact of recession. In the last eight months, macro economy has been challenged and global GDP is expected to contract for the first time since the World War II, he said.

However, impact in India is less than the other countries, the RBI governor said.

Subbarao made a note of the role of G 20 countries in the recovery and said that at the last meeting the group had discussed how to revive growth and regain confidence at the global level.

He noted three crucial aspects before the RBI– monetary policy, fiscal policy, and financial stability.

Expecting a probable recovery in the latter part of the current year, he said that if global recovery doesn’t take place, we will conclude the policy measures should have been stronger and that the RBI would act accordingly.

On the fiscal policy measures, he underscored the need for fiscal consolidation process. But he also cautioned that the next budget of the new government will bear pressure of stimulus packages.

He thinks a sound banking system along with a well developed financial market will help bring financial stability.

Subbarao found some comfort in factors like robust demand, and robust rural demand and lower WPI based inflation rate.

On the report of the Committee on Financial Sector Assessment (CFSA), he said we are most probably the first country in the world to go for self assessment of financial markets. He also mentioned the need to conduct a stress test.

The apex bank head said the rise in non-performing assets of banks did not pose much threat. The biggest challenge before the RBI is managing the trade-off between the short and long term changes in respective of global economic scenario.

He concluded that India will emerge from global recession stronger than before and that the nation’s financial markets stand resilient

source: economic times

Tags: , ,

Similar Posts: