But will RBI chief Raghuram Rajan’s actions today mirror Finance Minister’s confidence?

With Finance Minister P Chidambaram ending the last financial year of UPA-II on a self-congratulatory note claiming a stable economy, all eyes are on RBI Governor Raghuram Rajan to show his belief in these claims.

Rajan will announce the UPA-II regime’s last monetary policy on Tuesday. Although, the RBI is expected to keep the policy rates unchanged, it will be interesting to see how he presents the macro-economic picture, which will include growth estimates and inflation numbers.

On Monday, addressing mediapersons at the Congress headquarters, Chidambaram focused on his achievements of the last 20 months.

“The economy is far more stable now. We have contained the fiscal deficit, we have contracted the current account deficit substantially and we have added to our reserves. I can only see growth spurting provided the next government adheres to the 10-point agenda I outlined in the Budget,” he said.

And his parting shot was, “I will keep a firm hand on the steering wheel and hope that I hand it over to someone with an equally firm grasp.”

The fiscal deficit, he said, is down from 6 per cent in 2008-09 to 4.6 per cent in 2013-14, the revenue deficit has dropped from 4.5 per cent to 3.3 per cent in the same period and inflation has dipped from 8.1 to 5.9 per cent.

He said from 2008-09, the “watershed” year which totally altered the global economic landscape, it has been a journey of significant recovery. With these numbers, the Finance Minister dismissed the BJP’s outburst against him as “puerile”, but took care to supply statistical counters to each of the Opposition’s allegations.

Caution, the watchword

On the controversial domestically produced gas pricing issue, the Finance Minister justified the Cabinet decision and maintained that the Petroleum and Natural Gas Ministry’s decision to refer the issue to the Election Commission was more a matter of caution than necessity.

He said even on bank licences, RBI Governor Raghuram Rajan was “playing it safe” by referring the issue to the EC.

“There was no obligation on the part of the Ministry to refer it (gas pricing) to the EC. They did it out of abundant caution. I think there is no case to revisit the Cabinet decision,” Chidambaram said.

“When Governor Raghuram Rajan referred it to the EC, he was playing it safe. There was no need to do it. Again, abundant caution was exercised. He was playing it safe,” he added.

Dig at Modi

“Business is quite comfortable with Manmohan Singh and UPA finance ministers, but there are sections of businesses which are extremely comfortable with Narendra Modi because his brand of capitalism is crony capitalism,” Chidambaram countered.

India’s forex reserves have crossed $300 billion and the Government will consider some relaxation on gold import in consultation with the RBI, after the monetary policy, he said.

Meeting with Swiss

He further said that he will raise the issue of the Swiss Government’s refusal to share tax data on the sidelines of Fund-Bank meeting in Washington on April 10 and 11.

(This article was published on March 31, 2014)
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